SINGAPORE - What was tipped to be Singapore's largest initial public offering (IPO) of the year, and the first renminbi-denominated listing on the Singapore Exchange (SGX), has fallen on its face.
Dynasty Reit's flotation, which was expected to raise up to 5.4 billion yuan (S$1 billion), has been suspended until further notice, its sponsor, ARA Asset Management (ARA) said yesterday.
"I think this is one of the toughest decisions I've had to make in the last 10 years when I've been managing ARA," group CEO John Lim said in a conference call after markets closed.
Despite winning "substantial support" from institutional and retail investors, ARA said that there was a "marked change in market sentiment" in the past week.
It listed two factors for this change: the poor recent performances of several IPOs and a gradual worsening of overall market conditions.
Ho Cheun Hon, managing director, head of equity capital markets in Southeast Asia at Macquarie Capital Securities, said: "We looked at the book at the end of the day, the demand was there, but in our opinion, the demand was not such that we could allocate a transaction that we are comfortable to say would trade strongly in the aftermarket."
Macquarie is one of the IPO managers for the Reit, along with Standard Chartered Securities and DBS Bank.
On the matter of worsening market sentiment, Roger Tan, chief executive at SIAS Research, acknowledges a growing caution among investors but believes that Dynasty Reit's suspension could be an outlier.
"Getting funds from the market has been challenging but there had been much demand for S-Reits in 2012 so far," he said.
Three business trusts and Reits have been listed on the SGX this year.
"I think it's more the attractiveness of this IPO rather than the market itself," he said, adding that Dynasty Reit had an enticing yield.
The Reit had projected the range to be between 6.8 and 7.1 per cent this year for the period from August to December. For next year, it had expected a yield of 7-7.3 per cent.
"But I think investors are not sure of the quality of the assets and if there is a possibility that the Reit may call for more funds in the near future to increase the asset base given that there are only three assets in the Reit," Mr Tan said.
Dynasty Reit had listed three properties in its portfolio, all based in China: Nanjing International Finance Center, Dalian Tianxing Roosevelt Center and Shanghai International Capital Plaza.
It had even put in place a "distribution per unit (DPU) support" in order to hold up the yield.
This would have been achieved by the Reit using around 491 million yuan of the IPO proceeds to support the DPU, it had said in its prospectus filed with the Monetary Authority of Singapore.