The Listing Choice in Asia Paulina McGroarty Head EMEA, Listings November 2011
Singapore A Global Financial Centre Home to global companies Asia Pacific headquarters to >1/3 of Fortune 500 companies Wealth hub with largest institutional investor base in Asia >US$1.5 trillion assets under management World s 4th largest foreign exchange trading centre >US$330 billion average daily volume in 2010 Asian logistics centre World s largest bunker port and 2nd largest container port Trading centre for commodities 300 global trading companies 90 top global traders globally/regionally headquartered here SGX The Asian Gateway The Listing Choice in Asia 1
Why List in Singapore 1 International listing venue with Fast to Market Process 03 Page 2 Wealth Management Hub of Asia 10 3 Better Valuations 12 4 Chinese Investors Can invest in Singapore 15 5 Sizeable Retail Interest 16 6 Inclusion in Singapore Index 18 7 Lowest in Asia Trading Costs for Investors 19 8 First Class Support in Investor Relations 20 SGX The Asian Gateway The Listing Choice in Asia 2
Trading Asia in One Place Equity Derivatives China and India Asian companies listed in US Commodities Bonds Asia s most international listing venue 780 listed companies Asia s leading ETF venue Single point access to Asian markets Covering C i 80% of Asia s equity markets Only exchange outside China to offer futures for exposure to China s 50 largest companies. Futures contracts on India s largest companies ETFs Bonds Large Asian companies traded on newsflow in Asian time zone as ADRs Trading: Rubber Fuel oil Copper Zinc Aluminium OTC Clearing: Rubber Coal Iron Ore Freight Energy Asia s bond centre 1300 bonds 30 countries 10 currencies, including RMB SGX The Asian Gateway The Listing Choice in Asia 3
SGX A Truly International Exchange London Stock Exchange New York Stock Exchange Hong Kong Stock Exchange Tokyo Stock Exchange Non-UK 24% Non-US 7% Non- China 1% Non- Japan 0% UK 76% US 93% China 99% Japan 100% Singapore Exchange Country of Origin for Overseas Companies 773 Listed Companies, Market Capitalisation Over US$592 billion Singapore 59% Overseas 41% Greater China 68% India 1% Southeast Asia 21% Others 0% Japan & Korea 3% Australia 3% Europe 3% US 1% Source: Bloomberg & Singapore Exchange (Sep 2011) SGX The Asian Gateway The Listing Choice in Asia 4
Diversity of Industries Breakdown by Number Breakdown by Market Capitalization Basic Materials 7% Oil & Gas 4% Healthcare 3% Technology 9% Utilities 1% Financials 14% Basic Materials 1% Technology 1% Oil & Gas 4% Telecommunications 9% Consumer Goods 11% Healthcare 1% Utilities 2% Financials 39% Consumer Goods 15% Industrials 37% Consumer Services 13% Telecommunications 1% Consumer Services 13% Industrials 20% Source: Bloomberg, by ICB Classification, Sep 2011 SGX The Asian Gateway The Listing Choice in Asia 5
Fast Time-to-Market in Singapore Efficient application process allows issuers to catch desired opportunity window Mainboard Timeline: 4 5 weeks 1 2 weeks Preparation to apply SGX & MAS Concurrent Review Public Exposure Registration & Launch Trading Commences Pre Submission Consultation Hong Kong application review process takes 8 12 weeks SGX The Asian Gateway The Listing Choice in Asia 6
Market-Oriented Regulatory Framework No restriction on cornerstone and pre-ipo investors partaking in public offer HKSE has restrictions where cornerstone investors interest would be lock-up and moratorised No timing restriction for pre-ipo investment In HK, pre-ipo investments must be completed either (i) at least 28 clear days before date of first listing application submission or (b) 180 clear days before first day of trading of the applicant s securities Concurrent issue of ordinary and preference shares allowed at IPO Less than half the time taken to review as compared to Hong Kong SGX takes 7 weeks; HKSE takes 8-12 weeks Minimum public float of only 12% HKSE requires minimum 15% public float No requirement on public tranche offering allocation HKSE requires minimum 10% public tranche offering allocation Shorter controlling shareholder lock-up of 6 months HKSE controlling shareholder lock-up is 12 months Secondary fund-raising can be up to 50% of issued share capital under issue mandate HKSE only allows up to 20% SGX The Asian Gateway The Listing Choice in Asia 7
Flexibility for Optimisation of Capital and Shareholding Structures Issuers can calibrate voting and economic distribution desired with multiple types of securities Voting ordinary shares Non-voting preference shares Stapled securities Convertible securities Debt securities Flexible preference share regime allows customisation according to Issuers needs Limited voting rights Stapled or unbundled from ordinary shares With fixed or formula driven payout Cumulative or non-cumulative dividends Perpetual with provision for buy- out or otherwise Only one offering document needed to issue different securities at IPO in Singapore SGX The Asian Gateway Singapore s Regulatory Regime 8
Lower Compliance Costs for a Singapore Secondary listing Company Hong Kong Listing Requirements Secondary listing in Singapore Continuing obligations Appointment of a compliance adviser from listing date to the publication of financial i results for first full financial year after listing Appointment of at least 3 independent directors Annual preliminary results need to be published within 3 months after year end (London: within 4 months) Not applicable Not applicable Follow Home Exchange with simultaneous disclosure Related Party / Connected Person Transactions Major transactions Wide definition of connected persons, leading to higher compliance costs Multiple categories of connected person transactions with different thresholds requiring shareholder approval No spin-off is usually allowed within 3 years of the initial listing Follow Home Exchange Follow Home Exchange Not applicable and follow Home Exchange SGX The Asian Gateway The Listing Choice in Asia 9
Singapore: Wealth Management Hub of Asia Over 2,500 investment professionals Over US$1.5 trillion AUM 1 Institutional Funds >US$850bn Private Wealth Management >US$400bn Temasek and dgic >US$250bn AUM in Hong Kong about US$1.1 trillion 2 World's largest wealth management centre by 2013 3 Sources: 1 MAS 2009 Survey report, industry sources, Temasek and GIC annual reports 2 HK SFC 2009 Survey report 3 PWC Global Private Banking and Wealth Management Survey 2011 SGX The Asian Gateway The Listing Choice in Asia 10
Singapore s Proven Deep Market for Capital Raising SGX ranked 6 th globally in IPO funds raised in 1H2011 (US$7b) Raised record debt capital of US$140b in 287 issues 81% of Asia ex-japan G3 listed bonds, 62% of offshore RMB listed bonds Fund-raising in Singapore Proven in Bull & Bear Markets SGX-listed companies could tap on capital markets for funds during credit crunch 20.0 18.0 billion) Fund ds Raised (US$ 16.0 14.0 12.0 10.0 8.0 6.0 4.0 2.0-10.5 15.2 2.5 28 2.8 35 3.5 2.7 1.8 7.0 5.3 5.7 2.9 5.0 1.4 1.3 3.9 1.4 2.2 1.1 1.1 1.4 2.3 0.3 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011/2 Secondary Fund raising IPO Fund raising SGX The Asian Gateway The Listing Choice in Asia 11
Prominent Companies with Secondary or Dual Primary Listing on SGX Company Principle Country of Business Market Capitalisation (US$mn) First listing Second listing Jardine Matheson Holdings Hong Kong 28,868 Primary on London Stock Exchange Secondary on Bermuda and SGX Lonza Group Switzerland 3,100 Primary on SIX Swiss Exchange Secondary on SGX SP AusNet Australia 2,514 Primary on Australia Securities Exchange Secondary on SGX STX Pan Ocean Korea 1,830 Primary on SGX Primary on Korea Exchange Sri Trang Agro-Industry Thailand 1,158 Primary on Stock Exchange of Thailand Primary on SGX Malaysia Smelting Corporation Malaysia 131 Primary on Bursa Malaysia Secondary on SGX SGX The Asian Gateway The Listing Choice in Asia 12
What Lonza was looking for with an SGX secondary listing Lonza, a $5bn Swiss listed corporate, and one of the world's leading suppliers to the pharmaceutical and life science industries, was listed on the SGX mainboard by way of a secondary listing in October 2011. It currently employs 1,400 people in Asia. Broadening investor base in Asia - 14% of current revenues from Asia are not matched by Asian shareholders Creating a 'local currency' for future Asian growth Tap the strong capital flows in Asia and Singapore as a financial hub of Asia for future fund-raising. SGX The Asian Gateway 13
Why Singapore and not HK The governance standards and regulatory environment in Singapore are much closer to Switzerland than HK that is an administrative ease of a secondary listing on SGX. Lonza is familiar with the expectations in Singapore and we know Singapore is very serious about governance. Singapore has a long term stable future as a financial centre compared dto Hong Kong. We were unsure if the weight of Hong Kong will one day shift to Shanghai. -Interview to CNBC October 20/10/2011 -Mr Stefan Borgas, Chief Executive Officer of Lonza SGX The Asian Gateway 14
Singapore s Valuation Premium Asia vs Western Exchanges Companies on SGX and HKSe trade at a substantial premium This has been highly persistent in the last five years Source: Citi Consumer sector premium over NYSE/LSE peers since 2004 (average being 2.3x and 5.9x for HKEX and SGX respectively) Source: Citi Singapore vs Hong Kong General Valuation Premium = 18 28% for large companies ( US$1b) Both median or market cap weighted mean, or local indices (market cap US$4b) are considered Source: UBS and Morgan Stanley Consumer Sector Premium = 28 30% Source: Morgan Stanley SGX The Asian Gateway Welcome to SGX 15
SGX, HKSE: Key Considerations SGX The Asian Gateway The Listing Choice in Asia 16
Relative Valuation Levels of SGX vs HKSE Listed Companies SGX-listed companies trade 15 12.6 at higher 10.5 10 valuation levels as compared to HKEx-listed peers US$1Bn+ Market Cap Companies (1) 2011E P/E x 20 5 0 SGX Mean 12.4 Market Cap Weighted Mean HKEx 12.8 9.7 9.1 Median US$1Bn+ Market Cap Companies (1) 2012E P/E x 20 15 10 5 0 SGX 11.7 Mean 11.5 9.0 9.0 HKEx Market Cap Weighted Mean 12.0 7.8 Median Source Bloomberg as of October 4, 2011 Source Bloomberg as of October 4, 2011 All Companies (1) 2011E P/E x 20 18.2 All Companies (1) 2012 P/E x 20 18.1 15 10 8.3 11.5 9.3 14.6 6.7 15 10 6.9 10.8 8.6 14.4 6.8 5 5 0 Mean Market Cap Weighted Mean Median 0 Mean Market Cap Weighted Mean Median SGX HKEx SGX HKEx Source Bloomberg as of October 4, 2011 Source Bloomberg as of October 4, 2011 Note 1. Excludes companies with negative expected earnings and outlying P/E ratios above 40x SGX The Asian Gateway
Chinese Investors Can Invest in Singapore QDII Funds: QDII funds can invest in Singapore given MOU between MAS and CSRC Examples: ChinaAMC Global Selective Fund, China International Fund Management Co Ltd and ICBC Credit Suisse Asset Management Co., Ltd Stocks invested include: Olam, Cosco, Golden Agri, Keppel Corp, CapitaLand, Yanlord, DBS Group Prominent PRC investors in Singapore: Alibaba and Bosera* were cornerstone investors in Global Logistic Properties China Investment Corporation (Holds 15% of Noble) Sinochem (Holds 51% of GMG Global) Petrochina (Invested and privatised Singapore Petroleum Company, worth US$2.3b) Huaneng (Purchased Tuas Power, worth US$3b) PRC Citizens: May remit up to US$50,000 overseas annually, per State Administration of Foreign Exchange rules May freely open trading and banking accounts in Singapore Have 23,000 custodian accounts with our depository Note: Bosera is the discretionary manager of certain equity portfolio of the National Council for Social Security Fund of the PRC SGX The Asian Gateway The Listing Choice in Asia 18
Active Retail Investors Participation in Singapore Singapore retail investors can subscribe for IPOs via 2,000 ATMs No such facilities in Hong Kong Company Amount Public Retail Raised Offer Size (Public Offer only) (US$m) (US$m) Subscription Rate Retail Subscription Amount (US$m) HUTCHINSON PORT HOLDINGS 5,500 187 2x 281 GLOBAL LOGISTIC PROP LIMITED * 2,111 154 11x 1,689 MAPLETREE INDUSTRIAL TRUST * 427 76 28x 2,108 SABANA SHARI'AH COMPLIANT REIT 404 60 12x 739 CACHE LOGISTICS TRUST 304 26 20x 525 SRI TRANG AGRO-INDUSTRY PUBLIC COMPANY LIMITED** 264 19 1x 21 TIGER AIRWAYS HOLDINGS LIMITED 198 13 23x 306 Note: *B Both of fthese listed dduring the same week of 18 Oct 2010 ** Thai-listed and subsequent dual primary listing SGX; currently at premium to offer price Source: Company announcements SGX The Asian Gateway The Listing Choice in Asia 19
Vast Institutional Support for IPOs in Singapore Case Study: Offer size: US$2,996m comprising of: Cornerstone tranche: US$884m Placement tranche: US$1,607m Singapore public offer tranche: US$154m Book was covered within 24 hours of launch Subscription for placement tranche = 12.2x Participation from >450 institutional accounts SGX The Asian Gateway The Listing Choice in Asia 20
Index Inclusion Secondary listings can be included in the benchmark Straits Times Index (STI) Secondary listings cannot be included in the Hang Seng Index (HSI) An issuer can be fast tracked into STI at close of first trading day if its market cap exceeds 2% of that of FTSE ST All-Share Index The STI attracts an estimated US$23 billion from tracker funds (based on industry estimate of 9% of free float), and inclusion into STI would invite liquidity from such funds Qualified admission into STI is possible immediately at next review (conducted half yearly), unlike admission i into the HSI where a minimum i listing of up to 24 months is required Key criteria for STI inclusion: Largest 30 companies by market capitalisation More than 15% free float (across all fungible markets) At least 0.05% turnover (median daily trade per month) SGX The Asian Gateway The Listing Choice in Asia 21
Lower Trading Costs for Investors Asia s lowest trading costs with no stamp duty and no sales tax 12 Cost of securities trading (bps) Total Fees 10 8 6 4 2 Tax Broker Commission Exchange Fees 0 Singapore Hong Kong A US$10billion company with 100% annual turnover velocity will cost its investors US$20million in stamp duties in Hong Kong SGX The Asian Gateway The Listing Choice in Asia 22
Partnership with the Exchange SGX Investor Services Investor Relations Corporate Actions NASDAQ OMX Corporate Solutions Tools Dividend id d Payment Services Standard & Poor's UBS SGX Equities Research Insights (SERI) Program Global Markets Series SGX Central Depository Shareholding Services Rights Issues Other Corporate Action Services SGX The Asian Gateway The Listing Choice in Asia 23
Quantitative Criteria Current Market capitalization of at least S$80M; AND (a) Cumulative pre-tax profits of at least S$7.5M for the last 3 years and a minimum of S$1M per year; or (b) Cumulative pre-tax profit of at least S$10M for the last 1 or 2 years Mainboard Quantitative (positive cash flow required from operating activities) Criteria Proposed New (Under Public Consultation) (a) Profitable in latest financial year with operating track record of 3 years and market capitalization of at least S$150M; or (b) Positive operating revenue in the latest financial year and a market capitalization of at least S$300M Catalist Quantitative Criteria (a) No quantitative requirement (Sponsor prescribes in-house criteria) (b) Available rules for Mining, Oil & Gas (MOG) companies in exploration and production SGX The Asian Gateway 24
SGX Listing Fees MAINBOARD Mainboard CATALIST Catalist Minimum S$50,000 Minimum S$30,000 Initial Fees Maximum S$200,000 Maximum S$100,000 Variable S$100 / S$m market cap Variable S$100 / S$m market cap Minimum S$25,000 Minimum S$15,000 Annual Fees Maximum S$100,000 Maximum S$50,000 Variable S$25 / S$m market cap Variable S$25 / S$m market cap SGX The Asian Gateway 25
Appendix I: SGX Business Trust Structure t SGX The Asian Gateway The Listing Choice in Asia 26
SGX Business Trust Structure Key Advantages of a Singapore Business Trust What is a Business Trust Key Benefits of a Business Trust Listing Comparing REITs, Business Trust & Company Business Trust : Tax Comparisons SGX The Asian Gateway The Listing Choice in Asia 27
Key Advantages of Singapore Business Trust (BT) Singapore BT is a pure cash flow structure No additional structuring costs & complexities Certainty on distributing cash flows regardless of accounting profits Sponsors achieve control of assets and optimal monetisation of assets Sponsor only required to hold 25% interests in the listed BT to ensure control of the assets through h the Business Trust Manager. Therefore, this ensures optimal monetisation of assets to sponsor from the listing of the BT Fee Income to Sponsors The external Business Trust Manager structure offers management fee income benefits to sponsors Established BT Regime with peer comparisons There are 10 listed BTs on SGX in various sectors (4 Property Trusts, 3 Shipping Trusts, 2 Infrastructure Trusts & 1 Shipping Port Trust) A proven regulated structure familiar to Investors SGX The Asian Gateway The Listing Choice in Asia 28
The Business Trust Sector on SGX NAME ASSETS CURRENT MKT CAP DIVIDEND YIELD Property Trusts Ascendas India Trust Business Park US$529 mil 7.71 % Indiabulls Property Trust Mixed Commercial US$613 mil Nil Treasury China Trust Mixed Commercial & Office US$367 mil 2.85% Perennial China Retail Trust Retail US$504 mil Nil Infrastructure Trusts CitySpring Infrastructure Trust Gas & Electricity US$507 mil 10.0 % K-Green Trust Power Generators US$486 mil 3.35% 35% Hutch Port Trusts Shipping Ports US$5.84 bil 5.84 %* Shipping Trusts Pacific Shipping Trust Marine Transportation US$186 mil 10.27 % Rickmers Maritime Marine Transportation US$112 mil 9.13 % First Ship Lease Trust Marine Transportation US$151 mil 0.34 % Note: Yield at IPO price Source: Bloomberg on Aug 11 SGX The Asian Gateway The Listing Choice in Asia 29
What is a Business Trust? A Business Trust (BT) unlike a normal unit trust structure which employs 2 operators (Trustee and business manager), has only one single responsible entity (Trustee Manager) The Trustee Manager (TM) is both the trustee and the business manager. It holds the assets on trust for the beneficiaries and also acts as a manager who is contractually authorised to manage the assets of these beneficiaries Sponsor Unit holders Trustee Manager Owns Management and trustee services Management and trustee fees Holding of Units Ownership of Assets Distributions Business Trust Assets Net Assets Income Holding of Units SGX The Asian Gateway The Listing Choice in Asia 30
Key Benefits of a Business Trust Listing Fund raising A new source of securitisation capital without losing control of assets Valuation by cash flows A Yield Play listed product valued by cash flows plus growth Control of assets Maintain control of the assets through the Trustee Manager Gearing No Gearing Restrictions Development of new assets No Restriction on percentage of assets under development Dividend payout ratio Tax No minimum dividend payout ratio No further tax on foreign sourced income, taxed at source from assets to BT to unit holders. SGX The Asian Gateway The Listing Choice in Asia 31
Comparing REIT, Business Trust & Company Legislation Regime Code on Collective Investment Scheme REIT Business Trust Listed Company The Business Trust Act The Company Act Corporate Separate Trustee and REIT Trustee-Manger (TM) as single responsible Board of Directors and Governance Manager entity management Responsible Entity Board of Directors Decision Making 1/3 of the Board independent of management and business relationships with REIT Manager REIT Manager needs to seek agreement of Trustee >50% of the Board independent of management and business relationships with TM; >50% of the Board independent of any substantial shareholder unless that substantial shareholder holds 50% or more of the voting shares. In the latter a 1/3 independence d of the Board is required. Trustee-Manager At least 2 non-executive directors who are independent and free of any material business or financial connection with the company Company Management Asset Real estate No restriction No restriction Dividends Distribute from Cash Flows Distribute from Cash Flows Distribute from accounting profits Depreciation/ Revaluation No impact on payout No impact on payout Affects payout, which is restricted to accounting profits Gearing Limit 35% (60% if credit rated) None None Taxation Tax transparent Subject to Income Tax Act Subject to Income Tax Act SGX The Asian Gateway The Listing Choice in Asia 32
Business Trust : Tax Comparison REIT Business Trust Listed Company For the Trust/Company Income tax at Trust/Co. level No Yes Yes For Investors Individuals No tax (local and foreign) Local Institutions 20% No further tax if income tax paid Foreign Institutions 10% SGX The Asian Gateway The Listing Choice in Asia 33
Appendix II : Bond Listings SGX The Asian Gateway The Listing Choice in Asia 34
Overview of SGX Fixed Income Instruments There are over 1,200 bonds listed on SGX with about S$690 billion raised Description Treasury bills (T-bills) Singapore Government Securities (SGS) Corporate bonds Issuer Government Government Statutory Board, corporate Tenor(s) 91 days, 364 days 2, 5, 7, 10, 15 and 20Y 1-20 years Denomination SGD1,000 SGD1,000 SGD1,000 to 250,000 Amt Outstanding SGD56.1bn (Dec 10) SGD75.2bn (Dec 10) Est. SGD100bn (Dec 10) Primary Market Auction style Uniform price auction Uniform price auction Public offer, private placement Issue size SGD1-3bn SGD1.5-3bn SGD100-500mn Participants 13 primary dealers 13 primary dealers Banks, insurance and asset management companies Settlement T+3 (T+1 for secondary) T+3 or 4 (T+1 for secondary) T+3 Secondary Market Trading OTC OTC OTC or exchange traded Trading hours 9-11:30am, 2-4:30pm 9-11:30am, 2-4:30pm Not fixed Quoting convention Discount yield Price Price Average trade size SGD5-20mn SGD5-10mn SGD1-5mn Avg daily turnover SGD200mn SGD500mn SGD20-50mn Clearing MAS Electronic Payment System MAS Electronic Payment System Central Depository (Pte) Ltd SGX The Asian Gateway The Listing Choice in Asia 35
SGX Retail Bond Issues Singapore DBS Capitamalls Asia Capitamall Trust Fraser & Neave, Hyflux Airlines Preference Ltd Shares Size S$300mn S$800mn S$200mn S$300mn S$300mn S$400mn Tenor 5 years Perpetual 1 and 3 years 2 years 5 and 7 years Perpetual Coupon 2.15% 4.7% 1% for 1 year p.a. 2.15% for 3 years p.a. Date of Issuance Oversubs cription 30 Sep 2010 2% 2.48% for 5 years p.a. 3.15% for 7 years p.a. 22 Nov 2010 21 Jan 2011 25 Feb 2011 28 Mar 2011 25 April 2011 7X 3.5X Fully subscribed Fully subscribed Fully subscribed 5X Corporate Fixed Income Securities: 14 retail bonds and 11 preference shares SGD issues. Full subscriptions or oversubscriptions of these retail bonds at their initial offerings 6% Government Bonds: 19 Singapore government securities with SGD72.5 billion. SGX The Asian Gateway The Listing Choice in Asia 36
Strong Liquidity In SGX Retail Bond Market 500 450 400 350 300 250 200 150 100 50 0 Singapore Deposit Base (S$bn) 200 180 160 140 120 100 80 60 40 20 0 Central Provident Fund Balance (S$bn) Total Members' Balance Ordinary Account (OA) Balance All time high deposits peaked at S$441bn* Untapped liquidity in Central Provident Fund - Ordinary Account of S$78bn available for investment** *Total bank deposits from Monetary Authority of Singapore as of 31 March 2011. ** CPFIS OA figures from Central Provident Fund Board numbers as of 31 December 2010. SGX The Asian Gateway The Listing Choice in Asia 37
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