Singapore's NTT DC Reit, a data centre real estate investment trust, had a lacklustre market debut after riding a wave of AI interest to raise $773 million in the city-state's biggest IPO in four years. What could be weighing down on its performance? And is there really no saving grace for the SGX? Hairianto Diman chats with Kenny Loh, Wealth Advisory Director, REIT specialist and SGX Academy Trainer to find out.
You can listen to the CNA interview here, or read the summarised Q&A and/or transcript below.
Summarised Q&A
Q1: Why was NTTDC REIT's IPO debut considered lackluster despite being oversubscribed and backed by GIC?
A: The oversubscription figure of 9.8 times was misleading. The actual allocation to the public was very small, prompting many individuals to apply for more shares than needed, creating the illusion of strong demand. This perceived hype attracted institutional traders looking for quick gains. However, without sustained follow-up buying, prices dropped, triggering selling pressure and even short selling.
Q2: What factors contributed to the stock price falling below the IPO offer price?
A: Selling pressure intensified due to profit-taking and settlement cycles (T+2). Stabilization efforts, including the purchase of 30 million shares over a week, failed to maintain the IPO price of S$1. The stock hit a low of S$0.935 before stabilizing around S$0.96.
Q3: What are the key risks facing NTTDC REIT moving forward?
A:
-
Dividend Sustainability: The 7.5% DPU was based on a 100% payout, but future distributions are expected to normalize to 90%.
-
High CapEx Needs: Data centers require significant maintenance spending, which could reduce future yields.
-
Tenant Concentration: The top 10 tenants contribute over 60% of income, with one (possibly Tesla) contributing 31%.
-
Future Fundraising: Expansion plans mean investors may need to inject more capital.
-
Lack of Institutional Support: The REIT currently lacks strong institutional backing, relying mostly on retail investors.
Q4: How does NTTDC compare to other REITs in the sector?
A: Other REITs like Mapletree Industrial Trust (6.7% yield) and Digital Core REIT (6.9% yield) have longer track records and strong data center exposure. These may be more appealing due to established credibility and performance.
Q5: Does the performance of NTTDC signal a decline in appetite for data center REITs?
A: Not necessarily. Broader sentiment is improving, with the iEdge S-REIT Index signaling a possible bull trend. However, NTTDC’s unique risks mean it needs to rebuild investor confidence to recover.
Q6: What is the impact of MAS’s recent S$5 billion fund allocation on SGX?
A: The appointment of three asset managers to deploy the fund has boosted sentiment, especially among small- and mid-cap stocks. Increased trading activity and institutional inflows have been observed, suggesting positive momentum.
Q7: What more can be done to revitalize SGX and engage retail investors?
A: Beyond investor education and research grants, there needs to be a deeper understanding of why local retail investors avoid SGX stocks. Without strong local participation, reliance on foreign funds alone is not sustainable.
Transcript
HAIRIANTO:
We head now to the Singapore Stock Exchange, where we’ve just witnessed the largest IPO in four years—not from a bank or tech startup, but from a data center REIT. This comes amid growing global investor appetite for data centers in the APAC region, driven by growth potential and strong demand for AI services.
However, what was expected to give our equity market a boost saw a rather weak debut. The NTTDC REIT, backed by Japanese telecom giant Nippon Telegraph and Telephone, raised only S$713 million. In comparison, Hong Kong’s largest IPO this year, by battery giant CALB, raised at least US$4 billion.
NTTDC’s shares have performed poorly since their debut last Monday, trading below the offer price of S$1—even though the IPO was oversubscribed and had Singapore’s sovereign wealth fund, GIC, as a cornerstone investor. So, what weighed down its performance, and is there still hope for the SGX?
Let’s get some insights from Kenny Loh, Wealth Advisory Director at REIT Specialist and SGX Academy Trainer. Good to have you back on the show, Kenny.
This IPO was oversubscribed and had GIC backing. Considering it’s Singapore’s biggest IPO in four years, how far below expectations did it fall, and why was the debut so lackluster?
KENNY:
Good morning, Hari. While it’s hard to pinpoint an exact reason, based on trading patterns over the past few days, I see a few likely factors.
First, the 9.8 times subscription headline figure is somewhat misleading. Actual public demand wasn’t as strong as it appeared because the allocation to retail investors was very limited. As a result, many individuals applied for more shares than they needed in hopes of securing at least some allocation—creating an illusion of strong demand.
This perceived oversubscription likely attracted institutional traders who entered long positions expecting a post-IPO rally for quick gains. However, without sustained follow-up buying, there was insufficient support for the price to rise.
By mid-week, selling pressure intensified—particularly on Wednesday and Thursday—as traders closed their positions around the T+2 settlement period. This persistent selling, coupled with no rebound, began to attract short sellers.
On Monday, selling surged again, and NTTDC REIT hit a new low of S$0.935 before closing at S$0.96. Despite stabilization efforts, the price continued to fall. Last week alone, about 20 million shares were bought to support the IPO price of S$1, but it failed. Just yesterday, another 10 million shares were purchased in a single day to push the price back to S$0.96.
We’ll need to see whether the selling pressure continues this week. I believe short sellers are still active and may trade the stock for a while.
HAIRIANTO:
It clearly doesn’t seem like a good start for NTTDC REIT. So what’s next for them?
KENNY:
In my view, the stock will likely remain a trading play until its next earnings result. There are a few inherent risks that investors may have overlooked during the IPO.
One concern is the sustainability of the DPU. The indicative yield of 7.5% is based on a 100% payout, but the REIT has already indicated it will normalize to a 90% payout in future. Additionally, data centers require high CapEx for maintenance. If management decides to allocate more income for CapEx, yields could decline.
Another risk is tenant concentration. The top 10 tenants contribute over 60% of income, and the largest single tenant accounts for about 31%—rumored to be Tesla. Any geopolitical or operational issues involving Tesla could have an impact.
NTTDC has also signaled plans for more acquisitions to grow its portfolio, which means investors may need to participate in future equity fundraising.
Lastly, there's a noticeable lack of institutional support. During this period, the REIT sector has been mostly supported by retail investors, and without strong institutional backing, it's difficult to push prices higher.
There are also more established REITs offering attractive yields—for example, Mapletree Industrial Trust with about 6.7% yield and 55% data center exposure, and Digital Core REIT with a 6.9% yield. These may be more appealing due to their longer track records.
HAIRIANTO:
So what does the performance of this IPO say about investor appetite for data center assets? Is interest declining, even though some other REITs are doing well?
KENNY:
That’s a great point. Actually, if you look at the broader sector, sentiment seems to be turning positive. The iEdge S-REIT Index just broke the neckline of an inverse head-and-shoulders pattern, which could signal a new bull trend.
But NTTDC is a different story. The risks are real, and to regain investor interest, management must deliver on the promises made in the IPO prospectus.
HAIRIANTO:
Let’s shift to SGX itself. MAS recently appointed three asset managers to invest part of a S$5 billion fund to support the market. Do you think this could be a game-changer for revitalizing the Singapore stock exchange?
KENNY:
Yes and no. On the positive side, it’s a good move for the overall Singapore equity ecosystem. It will improve liquidity and performance.
Just yesterday, SGX published a market update showing that 50 outperforming stocks had average and median returns of 31% and 19% respectively. Trading turnover surged, especially for small- and mid-cap stocks. Some, like Sunpower and MDR, saw daily trading activity jump from 3,000 to over 300,000 shares within seven weeks. Q&M Dental led institutional inflows over that period, along with OKP, Lian Beng, and Grand Venture.
That said, we can’t rely entirely on foreign funds. SGX stocks are homegrown, and we need local investor support to ensure long-term sustainability. If institutions exit one day and we lack local participation, we’ll be back to square one.
As someone who works with investors daily, I can say many retail investors still don’t engage with SGX stocks. MAS and SGX need to understand why local investors are staying away—and address their concerns.
HAIRIANTO:
Absolutely.
KENNY:
Publishing more research reports—though important—won’t be enough on its own to boost liquidity.
HAIRIANTO:
Unfortunately, that’s all the time we have. Kenny, thank you so much for your insights this morning. We look forward to having you back soon.
KENNY:
Thank you, Hari.
HAIRIANTO:
That was Kenny Loh, Wealth Advisory Director at REIT Specialist and SGX Academy Trainer.
Kenny Loh is a distinguished Wealth Advisory Director with a specialization in holistic investment planning and estate management. He excels in assisting clients to grow their investment capital and establish passive income streams for retirement. Kenny also facilitates tax-efficient portfolio transfers to beneficiaries, ensuring tax-efficient capital appreciation through risk mitigation approaches and optimized wealth transfer through strategic asset structuring.
In addition to his advisory role, Kenny is an esteemed SGX Academy trainer specializing in S-REIT investing and regularly shares his insights on MoneyFM 89.3. He holds the titles of Certified Estate & Legacy Planning Consultant and CERTIFIED FINANCIAL PLANNER (CFP).
With over a decade of experience in holistic estate planning, Kenny employs a unique “3-in-1 Will, LPA, and Standby Trust” solution to address clients’ social considerations, legal obligations, emotional needs, and family harmony. He holds double master’s degrees in Business Administration and Electrical Engineering, and is an Associate Estate Planning Practitioner (AEPP), a designation jointly awarded by The Society of Will Writers & Estate Planning Practitioners (SWWEPP) of the United Kingdom and Estate Planning Practitioner Limited (EPPL), the accreditation body for Asia.
You can join his Telegram channel #REITirement – SREIT Singapore REIT Market Update and Retirement related news. https://t.me/REITirement