In a year of pulled transactions and weak listings in Singapore, Frasers Hospitality Trust’s S$400m (US$306m) Singapore IPO bucked the trend, winning investors’ full support and reopening the equity capital markets.
Frasers began marketing its float in June, ending a lull of about two months in the Singapore IPO market. It offered exposure to international assets and its success helped open up the market for the second half of the year, making the city’s exchange one of the more active markets in South-East Asia.
Singapore maintained its dominance of Asia’s yield-driven equity market in 2014. Selling such products, however, was far from an open-and-shut case, as many investors were wary of rising interest rates. Uncertainty over the US Federal Reserve’s interest-rate policy during 2014 meant issuers in Asia had to wait for the right window to launch their real estate investment trust and business trust IPOs.
Frasers’ float, however, managed to generate interest from investors, thanks to its reputable sponsors and high-quality assets.
It was the first global hotel and serviced residence trust to be listed on the Singapore Exchange, with properties located far beyond the city state. The trust’s portfolio included 12 assets in Asia, Australia and the UK. The geographical spread allowed investors to get exposure to an international portfolio of hospitality assets backed with strong management.
Traditionally, Singapore investors have been wary of REITs and business trusts with overseas assets, and have demanded a higher yield in return.
In the case of Frasers, these concerns were alleviated because of the solid reputation of the sponsors – Frasers Centrepoint and its parent TCC Group, both of which Thai tycoon Charoen Sirivadhanabhakdi owns.
The S$368m IPO with a greenshoe option of up to S$31.5m was launched at a fixed price of S$0.88, implying a yield of 7%. Singapore-listed hospitality REITs traded at yields of 5.8%–7.6% at the time.
Private banking clients and retail investors lapped up the IPO, and was covered on the first day of bookbuilding. Cornerstone commitments totalling US$205m also meant there were fewer shares available for other investors.
Fortress Capital bought S$40m, Sing Haiyi S$30m, Meren S$20m, DBS Private Bank S$40m, DBS Treasury S$25m and Wealthy Foundation S$50m. Wealthy Foundation is under the control of Tong Jinquan, the founder of China’s Summit Group and a regular investor in Singapore REITs.
In the end, the placement tranche of S$122.9m was 20.7x covered and the public offer of S$40m was 1.5x subscribed.
DBS was the sole global co-ordinator and the bookrunner with Morgan Stanley, Standard Chartered and UOB.
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