Nanshan-backed W Capital has more than 10 IPO pipeline deals

Singapore

HAVING built up the investment banking business in Tata Capital Markets and AMFraser Securities from scratch in his 16 years in investment banking, Wayne Lee decided last year to venture out with his own investment banking outfit.

The company, W Capital Markets, was one of three that received the issue manager and Catalist sponsor accreditation from the Singapore Exchange (SGX) earlier this week - no small feat considering that such firms are required to employ at least three professionals who meet stringent criteria in terms of their involvement in corporate finance advisory in listings in the 10 years prior to the application.

"How many initial public offerings (IPOs) have there been recently in Singapore? Twenty in 2017, and 15 in 2018. Since the penny stock saga in 2013, there hasn't been many IPOs to speak of, so to find these professionals that meet the requirements is very difficult. I needed to assemble this team, and in the market you can count with your fingers how many such professionals there are . . ."

Even with the dozen or so IPO deals each year, the quantum funds raised is still low, he adds. In 2017 and 2018, about S$4.7 billion and S$730 million were raised, respectively. The former was bolstered largely by the S$2.4 billion raised by NetLink NBN Trust.

But Mr Lee still has faith in the local stock market, and intends to draw on his relationships with corporate clients, private equity funds and family offices to attract more listings to Singapore.

He says W Capital already has more than 10 IPOs in the pipeline from countries such as Singapore, Australia, Indonesia, South Korea, and even Sri Lanka. They span sectors such as education, consumer, food and beverage, healthcare, professional services and advanced manufacturing.

"We intend to bring them for listing in Singapore, but before that we want to do pre-IPO fundraising . . . There's actually many overseas companies that ask why they should list in Singapore, given poorer valuations et cetera, so we attract them to come to Singapore by raising pre-IPO fundraising for them successfully to fund their M&A (merger and acquisition) activities and organic expansion geographically.

"The whole pre-IPO fundraising process takes about four months . . . Within four months, the money will be in, so the company can enhance its M&A, boost up its profits before it seeks for a listing, which typically takes 10-12 months. All these can be done concurrently, pre-IPO fundraising and IPO. When the companies eventually decide to list, we will also want to be their full sponsor."

The concern about losing IPOs to the rival Hong Kong stock exchange is real. Mr Lee says he has had to persuade clients looking to list in Hong Kong by telling them that their companies may be left as "orphans" there.

"It's a one-off IPO because they are considered 'micro-caps' in Hong Kong. Even if you might get a slightly higher valuation compared to Singapore, you may be a forgotten stock in Hong Kong thereafter."

W Capital has four lines of business: buyout M&As focusing on deal sizes ranging from S$50 million to S$1 billion; pre-IPO fund-raising; equity capital markets fund-raising in the form of share placements and convertible bonds; as well as financial advisory work for listed companies for corporate actions such as general offers, privatisations, rights issues, whitewash waivers, and interested person transactions.

Mr Lee is the major shareholder in W Capital, followed by China's Nanshan Group, a conglomerate with diversified businesses in commodities, tourism, golf, education, real estate, finance, aviation, and wellness businesses, mostly in China.

The company's board of six directors also includes two top executives from Nanshan.Nanshan's investment will allow the group to tap into the "immense potential" for foreign direct investments flowing from China to Asean countries through Singapore under the Belt & Road Initiative, Mr Lee says.

Since its inception last July, the firm has completed three deals: the Thakral family entity's partial offer to increase its stake in Thakral Corporation; the valuation of a Singapore-listed offshore support vessel company; and a S$50 million buyout of a private professional services firm.

Asked if there are enough deals, especially IPOs, to go around the sponsors and issue managers, Mr Lee says that he believes W Capital stands out as a full-fledged mid-market corporate finance firm that focuses on both M&As and IPOs. This is as opposed to most other full sponsors which only do IPOs, and banks, which have separate teams focusing on IPOs and M&A.

"I believe a combination of both M&A and IPO bankers in the same team will allow us to have that distinct competitive edge. The same investment banker can start from pre-IPO fundraising to listing to M&A, unlike banks with segregated departments and other boutique house full sponsors whose main core competency is IPOs, as well as M&A firms in Singapore which lack the full sponsor license required for doing listings."

In time to come, he hopes to build W Capital into an international financial group with presence in key financial centres in Asia-Pacific.

He also hopes that Singapore sovereign wealth investors can set up a fund here to focus on investing in the local equity market, particularly in the much neglected small- to mid-cap space, so as to bring back needed confidence to the market.

"It's a vicious circle, and (the benefits of doing so) will spill over into the IPO market, enhance IPO valuations and increase our competitiveness as a listing destination . . . We need government intervention to bring this whole level up. SGX has been doing its job to get the market vibrant again, but this cannot just be a private sector effort."

The other two firms awarded the issue manager and Catalist sponsor accreditation were Haitong International Securities (Singapore) and Evolve Capital Asia. In all, SGX has 47 accredited issue managers, including 16 Catalist Full Sponsors and four continuing sponsors.