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18-12-2010, 12:48 AM
Dec 17, 2010
TAIWAN DEPOSITORY RECEIPTS
Is market becoming overcrowded?
Companies need to assess whether their growth plans will appeal
By Yasmine Yahya
IN THEIR quest for cash, an increasing number of SGX-listed firms have been looking to take out secondary listings via Taiwan Depository Receipts (TDRs).
This year alone, seven Singapore-listed companies successfully launched TDRs, making up just under a third of the 26 TDRs issued this year. Osim has been granted approval by the Taiwan Stock Exchange (TSE) to launch its TDR and four others are in the pipeline.
But yesterday, one of Taiwan's biggest investment banks, SinoPac Securities, warned that the TDR market was in danger of becoming overcrowded and that companies should do some soul-searching before climbing on the bandwagon.
A TDR is a certificate traded in Taipei by firms listed on another bourse. Investors buying TDRs own shares and receive dividends paid out by the firm.
Executive vice-president of the underwriting marketing division at SinoPac Securities, Mr Alan Chuang, highlighted the fact that only two of the seven Singapore-listed firms that have launched TDRs are seeing their Taiwan-listed units trading above water today - Yangzijiang Shipbuilding and Super Group.
Yangzijiang Shipbuilding's TDR, whose issue was underwritten by SinoPac, closed at NT$21.55 yesterday, compared to its listing price of NT$18.80, while Super's TDRs ended the day at NT$15.95, up from its listing price of NT$14.95.
'Towards the end of the year, with the increase in the number of Taiwanese initial public offerings and TDRs, markets began to experience overcrowding,' said Mr Chuang.
He and a number of other TDR experts from Taiwan were in Singapore to give a seminar on the issues and challenges surrounding TDRs to local lawyers, auditors and business leaders.
Mr Chuang believes that too many firms view TDRs as just another quick way to raise funds, without reflecting on whether their growth story will appeal to Taiwanese investors.
To stem the overcrowding and ensure that future TDRs are more well-received by the Taiwanese market, SinoPac has devised a checklist for aspiring TDR issuers.
Firstly, a company hopeful of a successful TDR must have rapid growth potential in China and Greater China.
Secondly, it has to be comparatively undervalued in its original market. To determine this, SinoPac compares a firm's current valuation in its original market to those of firms from the same industry trading on the TSE. In Yangzijiang's case, for example, the shipbuilder was trading at eight times price-to-earnings on the Singapore market before it announced plans to seek a TDR. Today in Taiwan, it is trading at 13 times price-to-earnings.
The third and final test is that the company must be able to use Taiwanese assets and resources to create new business and use the country as a gateway to grow in China.
On the basis of SinoPac's checklist, Osim's upcoming TDR will likely do well, said Mr Chuang. The firm already has a retail presence in Greater China, so Taiwanese investors would be familiar with its products and growth plans.
SinoPac is in talks with 10 Singapore- listed companies that are eyeing TDRs, but based on its checklist, the underwriter will likely select only one or two to take to the Taiwanese market, claimed Mr Chuang.
Besides Yangzijiang, SinoPac has underwritten only one other Singapore-to-Taiwan TDR - that of Medtecs.
Despite SinoPac's cautious take on TDRs, Singapore firms still awaiting approval for their TDR applications are upbeat about their prospects in Taiwan.
Technics Oil & Gas executive chairman Robin Ting is confident that Technics' Taiwan-listed units will not sink below water if its TDR gets the go-ahead.
'Since we are the first oil and gas company that would be listed in the Taiwan capital market, we will bring a feeling of 'freshness' to the market and we believe therefore this will not happen to us,' he said.
'We will definitely focus on running our business well so that the TDR investors will appreciate the strong fundamentals of our company.'
Meanwhile, Kim Eng analyst Eric Ong is urging Singapore investors to be more discerning and less excitable about TDRs.
Companies that announce dual-listing plans often enjoy a knee-jerk reaction from the market that causes their share prices to surge, he noted. Osim shares rocketed 15.6per cent to $1.70 within eight days of its announcement of a TDR.
But their prices usually come drifting back down when investors realise that the firms' business fundamentals have not changed. In Osim's case, its shares closed yesterday at $1.60, almost 6per cent below its peak.
Mr Ong added that investors should note that they cannot transfer their Singapore shares onto the Taiwanese market. This means that Singapore investors cannot capitalise on the premium, if a firm's TDR is trading at a higher price in Taiwan than its shares in Singapore.
yasminey@sph.com.sg
TAIWAN DEPOSITORY RECEIPTS
Is market becoming overcrowded?
Companies need to assess whether their growth plans will appeal
By Yasmine Yahya
IN THEIR quest for cash, an increasing number of SGX-listed firms have been looking to take out secondary listings via Taiwan Depository Receipts (TDRs).
This year alone, seven Singapore-listed companies successfully launched TDRs, making up just under a third of the 26 TDRs issued this year. Osim has been granted approval by the Taiwan Stock Exchange (TSE) to launch its TDR and four others are in the pipeline.
But yesterday, one of Taiwan's biggest investment banks, SinoPac Securities, warned that the TDR market was in danger of becoming overcrowded and that companies should do some soul-searching before climbing on the bandwagon.
A TDR is a certificate traded in Taipei by firms listed on another bourse. Investors buying TDRs own shares and receive dividends paid out by the firm.
Executive vice-president of the underwriting marketing division at SinoPac Securities, Mr Alan Chuang, highlighted the fact that only two of the seven Singapore-listed firms that have launched TDRs are seeing their Taiwan-listed units trading above water today - Yangzijiang Shipbuilding and Super Group.
Yangzijiang Shipbuilding's TDR, whose issue was underwritten by SinoPac, closed at NT$21.55 yesterday, compared to its listing price of NT$18.80, while Super's TDRs ended the day at NT$15.95, up from its listing price of NT$14.95.
'Towards the end of the year, with the increase in the number of Taiwanese initial public offerings and TDRs, markets began to experience overcrowding,' said Mr Chuang.
He and a number of other TDR experts from Taiwan were in Singapore to give a seminar on the issues and challenges surrounding TDRs to local lawyers, auditors and business leaders.
Mr Chuang believes that too many firms view TDRs as just another quick way to raise funds, without reflecting on whether their growth story will appeal to Taiwanese investors.
To stem the overcrowding and ensure that future TDRs are more well-received by the Taiwanese market, SinoPac has devised a checklist for aspiring TDR issuers.
Firstly, a company hopeful of a successful TDR must have rapid growth potential in China and Greater China.
Secondly, it has to be comparatively undervalued in its original market. To determine this, SinoPac compares a firm's current valuation in its original market to those of firms from the same industry trading on the TSE. In Yangzijiang's case, for example, the shipbuilder was trading at eight times price-to-earnings on the Singapore market before it announced plans to seek a TDR. Today in Taiwan, it is trading at 13 times price-to-earnings.
The third and final test is that the company must be able to use Taiwanese assets and resources to create new business and use the country as a gateway to grow in China.
On the basis of SinoPac's checklist, Osim's upcoming TDR will likely do well, said Mr Chuang. The firm already has a retail presence in Greater China, so Taiwanese investors would be familiar with its products and growth plans.
SinoPac is in talks with 10 Singapore- listed companies that are eyeing TDRs, but based on its checklist, the underwriter will likely select only one or two to take to the Taiwanese market, claimed Mr Chuang.
Besides Yangzijiang, SinoPac has underwritten only one other Singapore-to-Taiwan TDR - that of Medtecs.
Despite SinoPac's cautious take on TDRs, Singapore firms still awaiting approval for their TDR applications are upbeat about their prospects in Taiwan.
Technics Oil & Gas executive chairman Robin Ting is confident that Technics' Taiwan-listed units will not sink below water if its TDR gets the go-ahead.
'Since we are the first oil and gas company that would be listed in the Taiwan capital market, we will bring a feeling of 'freshness' to the market and we believe therefore this will not happen to us,' he said.
'We will definitely focus on running our business well so that the TDR investors will appreciate the strong fundamentals of our company.'
Meanwhile, Kim Eng analyst Eric Ong is urging Singapore investors to be more discerning and less excitable about TDRs.
Companies that announce dual-listing plans often enjoy a knee-jerk reaction from the market that causes their share prices to surge, he noted. Osim shares rocketed 15.6per cent to $1.70 within eight days of its announcement of a TDR.
But their prices usually come drifting back down when investors realise that the firms' business fundamentals have not changed. In Osim's case, its shares closed yesterday at $1.60, almost 6per cent below its peak.
Mr Ong added that investors should note that they cannot transfer their Singapore shares onto the Taiwanese market. This means that Singapore investors cannot capitalise on the premium, if a firm's TDR is trading at a higher price in Taiwan than its shares in Singapore.
yasminey@sph.com.sg
My Value Investing Blog: http://sgmusicwhiz.blogspot.com/
