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How will the NetLink Trust IPO perform?
By Kim Iskyan, Publisher, Stansberry Churchouse Research
Singapore is seeing a lot of stock launches this year. This year alone, there have been 10 initial public offerings (IPOs) so far. That’s the most the country has seen in the first half of the year since 2013.
And there are plenty more to come. Several blockbuster listings in Singapore are expected in the second half of the year.
In its IPO earlier this month, NetLink Trust offered almost 3 billion shares at S$0.81 each. The IPO raised S$2.35 billion. That makes it Singapore’s largest IPO in six years. The stock will begin trading on the Singapore Stock Exchange on July 19.
NetLink designs, builds, owns and operates the infrastructure for Singapore’s Next Generation Nationwide Broadband Network.
The trust was a subsidiary of Singtel. But regulators told the company to divest itself of more than 75 per cent of the trust before April 2018 under structural separation rules. There’s been a lot of hype around this launch – and the Singapore IPO market in general.
Many investors are pouring money into these IPOs in the hopes of making big gains in a short time. But are these IPOs a good investment in the longer term?
If you’re looking to invest in one of these companies, ask yourself seven questions first. Then consider how the stock might perform after its IPO.
Recent Singapore IPOs
To see how Singapore stocks performed after their IPOs, we looked at all the IPOs in the Republic since July 2013 that raised over US$100 million. There were 20 of these.
Then we looked at the one-week, one-month, three-month and one-year performance of these stocks after their IPOs, compared to the average performance of the Straits Times Index.
As you can see, the average one-week return for these stocks after they went public was 0 per cent. That’s around the same that the STI performed on any given week.
But after the first month, the average performance of IPOs was negative. And after one year, the IPO stocks had lost 9 per cent – while the STI returned nearly 4 per cent.
Now, these are just averages. Some IPO stocks did well. Soilbuild Business Space REIT, a real estate investment trust company, soared 21 per cent during its first year. But other stocks underperformed. Take dairy farming company Japfa Ltd, which fell 66 per cent during its first year.
On average, Singaporean IPOs did not beat the market during the first year… in fact, they would have lost you money. Now, remember, there’s a lot of variance in the performance of IPOs – some perform well and others perform terribly.
In the case of NetLink, it’s a big offering in a mature industry. It’s unlikely that it will return big gains in the first week. So if you’re looking for an IPO to invest in, you might be better off looking at the shares of recent IPOs that underperform… and finding value there.
Good investing,
Kim Iskyan
Publisher, Stansberry Churchouse Research
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