Does strict due diligence guarantee a successful IPO? THE Singapore Exchange is convinced that investment banks which have very strict homework processes will tend to generate better quality companies to the marketplace. That is why it is going to be very selective in qualifying the entire sponsors – those accountable for bringing companies for listing on its new table, Catalist.
So which of the investment banking institutions have had the best record in the last 3 years? Before we go in to the detailed results, let’s set the stage with some big picture quantities. Now to the information of the various investment banking institutions. Surprisingly, all the local banks’ corporate finance outfits did not employ a good history of bringing better performing companies to the market. For example for DBS, of the five companies it taken to the main plank in 2005, only 1 – Asia Enterprise Holdings – managed to outperform the broad market.
The rest – Longcheer, Genting International, Electrotech and CDW – had all fared worse than the marketplace. They are IPOs where DBS was the only real issue manager. The average annualised earnings of the five IPOs is 14 percentage factors worse than the SES All Shares Index. The median is -10 per cent.
In that calendar year, OCBC brought three companies to the primary board. All three – Ban Leong Technologies, Karin Union and Technology Steel – under-performed the marketplace. Meanwhile, UOB Asia had four main board IPOs in 2005. Only 1 – C&O Pharmaceutical nearly edged prior to the general market by 1.3 %. The others, Sarin Tech, Advanced Integrated Manufacturing and Pacific Healthcare chalked up returns of 10 to 36 percentage points lower than the market.
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All its three Sesdaq companies in that year also dropped significantly behind the marketplace – in excess of 30 percentage factors – in conditions of share price performance. Their general record in 2006 remaining much to be desired also, although OCBC do hit the jackpot with Jiutian. Between its IPO and Wednesday this week, the stock has outperformed the market by a whopping 160 percentage points.
Last year had not been much better. Arguably, the investment bank or investment company which includes the best performance before three years is HL Bank or investment company. You can find more strikes than misses as it pertains to the ongoing companies it helped go general public. In 2005, it managed the IPO of China Sky Sinopipe and Chemical Holdings. The former outpaced the market by 45 percentage points, while the latter performed good market.
Three out of its five IPOs outpaced the market. There, is however, no escaping the duds. That year In, Fabchem had ended up being one, therefore did Sun East. Last year, it was accountable for bringing China Oilfield to Singapore. Till this week And up, that counter is prior to the market by 48 percentage points.
Even for Sesdaq list, HL Bank or investment company has brought more winners and losers to traders. Hong Leong Finance had a good record in 2005. It strike the bull’s eyes in every three deals that it did – Fragrance Group, BH Global Marine and China Wheel. Each has outperformed the marketplace by 92, 52 and 11 percentage points respectively.