Xyec Picks Singapore Over Japan for Historic IPO: Southeast AsiaTomoko Yamazaki and Komaki Ito
Xyec Holdings Co., the first Japanese company to debut only in Singapore, plans to expand its information technology business in Southeast Asia through acquisitions and by hiring local talent.
The company plans to raise a couple of million dollars in an initial public offering and start trading on Singapore’s Catalist board for smaller enterprises on Sept. 18, Chief Executive Officer Manabu Kobayashi said. Tokyo-based Xyec is in talks with two Singaporean companies in the information technology industry about possible deals, he said, declining to elaborate because the talks are private.
Xyec, which provides engineering and information technology services such as software development to manufacturers including a unit of Toyota Motor Corp., chose Singapore over Japan because of Southeast Asia’s growth potential compared with declining demand and shrinking population at home. It targets total sales growth of more than 50 percent to 10 billion yen ($100 million) in the next two years, with 10 percent of that total to come from the region, Kobayashi said.
“We want to make Singapore the base of our Asean expansion,” Kobayashi, 48, said in a telephone interview from Tokyo last week, referring to the 10-member Association of Southeast Asian Nations. “We want to increase our regional presence and capture good talent that we may not be able to get if we remained in Japan, given the size of our company.”
Xyec will be the first Japanese company to have the primary exchange for trading of its shares in Singapore, according to Kobayashi.
“Listing abroad would lead to increased presence in the region as well as credibility, making it easier for the company to find staff,” Tamami Ota, a Tokyo-based economist at Daiwa Institute of Research Ltd., said. “It would make it easier to raise funds in the local currency as well.”
Singapore Exchange Ltd., Southeast Asia’s biggest bourse, has attracted foreign companies as it aspires to become the region’s financial gateway. There were 302 non-Singaporean companies traded on SGX out of 782 companies as of August and nine of them were Japanese, according to SGX. All the other Japanese companies are also listed in Japan.
Xyec, pronounced “Zeek,” chose Singapore over Japan because of the attraction of raising funds from global investors and globally consistent regulation of additional share sales, which it might undertake for expansion, Kobayashi said. The company plans to open an office in Singapore by the end of March 2014, which will become the headquarters for business in the region outside Japan, he said.
Companies around the world have announced deals of about $72 billion of assets in Southeast Asia this year, according to data compiled by Bloomberg, amid expectations for growth that outpaces the rest of the world.
Asean consists of Indonesia, Thailand, Malaysia, Singapore, Brunei, the Philippines, Cambodia, Laos, Myanmar and Vietnam. The International Monetary Fund forecast July 9 that Asean’s developing nations would expand 5.6 percent in 2013, compared with 0.6 percent contraction in the euro area.
Not all agree that listing overseas before your home market is a wise tactic. Companies raised about $4.5 billion from IPOs in Singapore this year, compared with about $8.1 billion gathered in Japan IPOs, according to data compiled by Bloomberg.
“Listing requirements are famously strict in Japan, but if you’re listed and want to expand overseas, there’s no reason to drop your Tokyo listing,” Nicholas Smith, the Japan strategist at CLSA Asia-Pacific Markets in Tokyo, said. “You don’t want to lose your Japanese sticky capital: just do a follow-on offering for overseas investors.”
Xyec will be the first Japanese company to list on SGX’s Catalist board, according to the bourse. Nomura Holdings Inc., the nation’s biggest brokerage, Murata Manufacturing Co., a supplier to Apple Inc. and Samsung Electronics Co., and department store operator Isetan (Singapore) Ltd. are among other Japanese companies traded on SGX’s mainboard.
To woo foreign companies to list in Singapore, the Southeast Asian bourse introduced new rules in the past two years to allow the listing of resource companies without an earnings track record on both the Catalist and mainboard, as well as dual-currency trading for stocks and exchange-traded funds.
SGX posted a 43 percent jump in profit for the three-months ended June, its best quarterly performance since the same quarter of 2007, as stock volumes rebounded and derivatives contracts climbed to a record.
Xyec is targeting Japanese companies that have expanded in the region, including Vietnam, Myanmar and Thailand and seeking to recruit staff in the Philippines, Vietnam and Myanmar, Kobayashi said. While the company has focused on providing services to the manufacturing industry, it’s now seeking to expand into finance as well, he said.
“For survival today, we need to make sure to capture good talent especially for a small-to-medium-sized company like us,” Kobayashi said. “We had to branch out overseas quickly. Singapore is becoming a hub for Asia, and we thought listing in that country would earn us recognition.”