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Business trends

Southeast Asia defies global IPO slump, thanks to old-economy stocks

At least 40 companies in pipeline, led by real estate, retail and food

A retail unit of Central Group plans to go public soon on the Stock Exchange of Thailand. (Photo by Akira Kodaka)

SINGAPORE -- Stock listings in Southeast Asia grew 13% in the year through September, bucking a global downtrend and with several high-profile initial public offerings still to hit the market before the end of 2019.

Data from consultancy firm EY showed that there were 89 IPOs in Southeast Asia in the year to end-September that raised total proceeds of $4.8 billion, up 1% from the same period a year ago.

Globally, there were 768 listings that raised proceeds of $114 billion. Those figures marked falls of 26% and 25%, respectively, as U.S.-China trade tensions, Brexit and other global uncertainties put a lid on IPOs.

EY sees this trend in Southeast Asia playing out over the rest of the year.

"Despite ongoing geopolitical and economic challenges, there is still a pipeline of IPO aspirants in Southeast Asia looking for an opportune time to tap the market," Max Loh, EY's ASEAN IPO leader, told the Nikkei Asian Review. "We expect that the surge in activity in the third quarter [of 2019] to spill into the fourth quarter as IPO activity in the region focuses on the Southeast Asian consumption growth story."

Siam Cement Group, a Thai industrial conglomerate, has started the process to list its packaging subsidiary on the Stock Exchange of Thailand to raise funds for expansion, said Roongrote Rangsiyopash, president and CEO of the group on Monday.

He said the company’s board of directors approved on Monday the plan to issue new ordinary shares of its subsidiary SCG Packaging, although he declined to comment on when the company would file for the IPO. Two market sources said that SCG is expected to raise at least 30 billion baht ($1 billion) from the IPO.

Among other listings in the pipeline is that of Central Retail, a core retail unit of Thailand's major conglomerate Central Group. Central Retail has department stores and other retail outlets in Thailand, and it is also increasing its presence in Vietnam. Through this what is likely to be a billion-dollar IPO, the company aims to expand branches domestically and overseas. The company has filed its prospectus with the SET.

Canned tuna producer Thai Union Group's subsidiary Thai Union Feedmill, producer of shrimp and fish feed, has also filed for an IPO. It plans to expand the feed producing business in Indonesia and other countries.

As of Oct. 21, 18 stocks have made their debuts on Thailand's bourse this year. By the end of 2019, the number is likely to exceed the previous year's 19 issues, as 13 more companies have filed paperwork stating their intention to go public. Six of the 13 have already had their applications approved by Thailand's Securities and Exchange Commission. Among them is S Hotels and Resorts, the hospitality arm of property developer Singha Estate.

In Malaysia, furniture manufacturer Spring Art Holdings and solar system installer Solarvest Holdings plan to be listed on the local exchange in November, while Vietnam's new airline Bamboo Airways is reportedly aiming for an IPO next year. Indonesia Stock Exchange has some 30 companies in the pipeline.

According to QUICK-FactSet database, at least 40 companies have filed for IPOs this year in the region that are still waiting to come to market.

Southeast Asia's active IPO market is driven by companies in traditional sectors, with real estate sector accounting for 59% of total proceeds through September, followed by consumer product makers and services providers with 14%.

"Real estate is in the spotlight primarily because it is a sector that investors are comfortable with and given the Singapore Exchange's niche strengths in REITs (real estate investment trusts)," said EY's Loh. One of the latest major IPOs in the real estate sector was Thailand's Asset World, conglomerate TCC Group's property arm that operates hotels and offices in Bangkok.

Such conglomerates as well as state-owned companies are increasingly aspiring to tap opportunities in a steadily growing Southeast Asian economy through IPOs. "Companies are motivated to list not just for capital-raising but for strategic branding and access to new markets," Loh said.

For Thai property companies, this year may be a good time to raise funds for overseas expansion, due to favorable exchange rates. "The strong baht will help us with acquiring overseas assets," according to Chairath Sivapornpan, chief financial officer of S Hotels and Resorts, which is expected to list on the SET soon.

The hospitality specialist operates 39 hotels and resorts in five countries: Thailand, the Maldives, Fiji, Mauritius, and the U.K. It hopes to double that number to 80 properties by 2025. "Proceeds from the IPO will be used for hospitality business expansion and investment in both the domestic and overseas markets," Chairath said.

Globally, this year's major IPOs included U.S. ride-hailing operator Uber Technologies, videoconferencing company Zoom Video Communications, and business chat service Slack Technologies. Hence, the technology sector accounted for 36% of the total proceeds through September globally, topping other sectors like health care (16%) and industrials (8%).

Yet, the technology sector accounted for only 1% of total proceeds in Southeast Asia. Tech-based businesses are booming in Southeast Asia, especially digital consumer services such as ride-hailing and e-commerce. But most of those companies are still raising funds privately.

Additional reporting by Masayuki Yuda and Apornrath Phoonphongphiphat in Bangkok.

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