AIM High: An alternative means of raising capital to Singapore’s secondary listing market

Despite the gloomy economic outlook in Europe, South East Asian (SEA) companies can still successfully come to the London Stock Exchange AIM market and raise capital in doing so.

Benefitting from buoyant consumer markets and growth in the region, SEA companies are using the London-based alternative market to capitalise on their success.

Part of the popularity of AIM in this part of the world may be due to the fact that AIM is better suited to SMEs or younger SEA companies, which also often operate in specialized sectors: listing requires no minimum number of shares to be held in public hands, no minimum market capitalisation and no minimum trading records.

Most importantly, listing on AIM allows companies to attract overseas institutional investors who are hungry for Asian investments.

When SGX unveiled the new regime for its own junior market, Catalist, in 2007, there had been questions over whether the new Singaporean market would compete with AIM for Asian companies seeking to list. Despite the success of Catalist, the past 5 years have not witnessed a corresponding flight of SEAs from AIM. In fact, seven SEA companies were admitted to AIM in 2011, and of these seven, four raised money on their first day of trading. SEA companies also raised a total of over S$400m through secondary fundraisings on AIM last year.

The explanation for the continuing attractiveness of AIM despite the existence of a viable Singaporean alternative may be attributed to 3 factors.

A key point for many SEAs is valuation. Although it was intended that the cost of listing on Catalist would be 30% lower than that its UK equivalent, AIM is considered to offer marginally higher valuations than Asian exchanges.

Secondly, the choice of market is affected by the investor base that the prospective applicant is seeking to attract: those looking to grow in Asia may favour Hong Kong or Singapore, however businesses seeking to access European-based pools of capital may be best served by listing on AIM.

Finally, although the sectors covered by the SEA companies already listed on AIM are as extensive as their geographical scope, certain sectors, such as oil and gas exploration and natural resources, do gravitate naturally to AIM. SEAs may prefer to list on the same market as their competitors, who are already on the more established AIM marekt. Given the predicted growth of these sectors in the region, it will be interesting to see whether Singapore or London reaps the benefit in coming years.

Thus, rather than considering AIM and Catalist as markets in direct competition for SEA business, it may be more accurate to regard the two as complimentary. It is evident that a range of factors influence which market SEA decide to list on, rather than geography alone.

Companies seeking access to capital should also be heartened by the broad distribution of market cap of AIM-traded SEAs: the average market cap is £86m (compared to £57m on the AIM market as a whole). However, even smaller companies can achieve impressive results: despite having a market cap of only £5m, Top Creation Investments Ltd (one of the seven companies to list in 2011) raised £3m on its first day of trading. This company's success stands as a salutary reminder that even in difficult financial straights, a company with the right story and comprehensive preparation can successfully be brought to AIM in London.

The fact that seven SEA companies came to AIM last year alone testifies to a growing awareness among smaller, high-growth Asian companies of the benefits of listing on AIM. Listing gives companies the opportunity to raise their profile internationally within a more favorable regulatory environment than the main market of the LSE. The lower regulation of AIM decrease the time it takes to get to market and compliance costs for a potential applicant.

There is no silver bullet to a successful admission to AIM, however, several factors could increase the chances of a profitable listing. Good investor relations and extensive promotion among investors are key to promoting the company and generating sufficient publicity. This is especially important for companies in South East Asia given the need to raise their profile among institutional investors who are based in the West. Identifying the right match of investors for the company and courting the latter extensively has been shown to pay dividends. Finally, all aspirant companies should have a business plan, both long and short term, so that listing on AIM acts as a stepping stone for the next prosperous chapter in the company's history.


Nicholas Hanna, Partner, Watson, Farley & Williams Asia Practice LLP
[email protected]
+65 6551 9185