Why the Asian focus?
Last month’s article focused on the (disconcerting) facts about the US economy, the economic ascendancy of China and the real demand drivers for current growth in our own economy. There’s little doubt that the Asian dollar will play a larger part in Australian business moving forward. We have written previously about strategic foreign investors and the Hong Kong Securities Exchange, which we consider to be the pick of close-range Asian markets in terms of providing the best conduit to Chinese money.
Following this theme, we highlight some key information about another of the Asian markets: the Singapore Stock Exchange (SGX).
SGX Main Board – Listing Criteria
Financial admission tests (3 options) –
(1) Cumulative consolidated pre-tax profit of at least S$7.5m for the last 3 yrs, with a pre-tax profit of at least S$1m in each of those 3 yrs;
(2) Cumulative consolidated pre-tax profit of at least S$10m for the latest of 1 or 2 yrs;
(3) Market cap of at least S$80m at the time of the IPO, based on the issue price and post invitation issued share capital.
Other financial criteria – Healthy financial position with positive cash flow; all debts owing by directors, substantial shareholders and companies controlled by them must be settled (except subsidiaries and associated companies).
Shareholders – Minimum of 500.
Spread – Requirements range from 25 per cent of enlarged capital in public hands (for market cap <S$300m) to 12 per cent of enlarged capital in public hands (for market cap >S$1 billion).
Board and management – (Key requirements) at least two non exec directors who are independent and free of any material business or financial connection with the issuer, and at least 2 independent directors residing in Singapore (for foreign issuers).
Promoters’ escrow – Depends on the financial admission test. Minimum requirement of 100 per cent of shareholding for first six months after listing, with additional requirement of 50 per cent of original shareholding for next 6 months if admitted under the market capitalisation test.
Financial reporting requirements – Singapore Financial Reporting Standards, U.S. GAAP or IFRS.
Catalist (SME Market) – Listing Criteria
SGX also operate an alternate market named ‘Catalist’ (formerly SESDAQ) for SMEs that are unable to meet the strict quantitative criteria of the Main Board.
Sponsor – Catalist is a ‘sponsor-supervised’ market. Each applicant must appoint an approved Catalist Sponsor whose role during the IPO process is to: conduct due diligence on listing applicants, act as the lead manager and underwriter, assist with the production of an Offer Document (prospectus style disclosure), and ultimately decide whether the applicant is suitable to be listed on Catalist. After the IPO, the sponsor will remain engaged to advise on listing rule compliance and review public documents. Sponsors are also obligated to whistle-blow to the SGX when there is a suspected or affirmed listing rule breach.
Financial admission/Market cap tests – Nil.
Other financial criteria – All debts owing by directors, substantial shareholders and companies controlled by them must be settled (except subsidiaries and controlled entities).
Board – At least two non-executive directors, one of which must ordinarily reside in Singapore.
Shareholders and spread – Minimum of 200 shareholders, with at least 15 per cent of shares in public hands.
Escrow – 100 per cent of the shareholdings of all controlling shareholders and their associates and executive directors with 5 per cent of share capital at the time of listing are subject to escrow for at least 12 months after listing and must maintain at least 50 per cent of their original shareholding for the next 6 months.
Additional requirement for mineral companies – A listing applicant whose activities consist solely of mineral exploration must establish the existence of an Indicated Resource in a defined area where the applicant has exploration and exploitation rights, and which must be substantiated by a qualified person’s report.
Shift to Main Board – Catalist-listed companies looking to transfer to the Main Board must have been listed on Catalist for two years, meet the Main Board criteria for profit shareholder spread (see above), undergo a review by the SGX and obtain shareholder approval via a special resolution.
With the flexibility offered by the choice of the Main Board for well established entities, and Catalist for SMEs or resource explorers who are unable to meet the financial tests, the SGX is well worth a look for those considering Asian capital.
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