Lotte Shopping delays S$1.27b Singapore IPO

SINGAPORE — South Korea’s Lotte Shopping has postponed a Singapore initial public offering of its mall assets that was expected to raise up to US$1 billion (S$1.27 billion), after what sources said was its unwillingness to meet investors’ demand for a lower price.

A Lotte official, who declined to be named, confirmed that the company had postponed the IPO, but did not state the reason for the delay. “Realistically, a March IPO isn’t likely,” the official said, without elaboration.

Lotte had planned to offer a yield of 6 to 7 per cent, but investors, who buy shares in real-estate investment trusts primarily for the dividend yield, were seeking more than that, which the company was not comfortable paying, one of the sources said. The listing has been delayed until the second quarter, the sources said.

Investors’ demand for a lower price — which translates to a higher yield — reflect the challenging environment for Lotte and others planning IPOs now that the United States Federal Reserve has begun to wind down its monetary stimulus programme.

Amid historically low interest rates, investors had flocked to Singapore IPOs of REITs and business trusts for their higher yields.

However, the Fed’s move is pushing rates higher in the US and elsewhere, leading many investors to demand higher yields as well as return to the relative safety of developed markets.

Singapore Exchange, home to nearly 50 trusts with a combined market capitalisation of around US$65 billion, dominated Asia’s market for trust listings last year.

REITs now offer yields close to 7 per cent, higher than the 6 to 6.5 per cent in previous years. OUE Commercial Real Estate Investment Trust, which listed its commercial and office property assets in Singapore in January, offered an annual yield of as much as 6.8 per cent.

Lotte operates 108 large stores and 31 department stores in South Korea. It reported 20.8 trillion won (S$24.4 billion) in revenue over the first nine months of last year. A successful listing would surpass the US$367 million IPO eight years ago by dry-bulk shipping company STX Pan Ocean, also in Singapore, making it the biggest overseas IPO by a Korean firm.

Lotte had decided to list in Singapore to expand its business in Asia and create brand awareness. It had received listing approval from SGX last month and had been planning to test investor appetite during the pre-marketing phase before listing this month.

However, it never reached the pre-marketing phase, which takes place just before a company starts taking orders from investors.

Weakened sentiment towards emerging markets has also hurt share prices in Singapore.

The Straits Times Index has lost 2 per cent so far this year and some recently listed trusts are trading below their IPO offering prices. OUE Commercial and Viva Industrial Trust, which listed last November, are down 1.3 and 0.6 per cent, respectively.

Still, around US$3 billion of trust listings remain in the pipeline in Singapore, including a planned US$700 million offering by Indian conglomerate Larsen & Toubro, which is looking to list some of its Indian toll roads.

DOW JONES