1H2023 and 1H2024 Industry Market Multiples and Market Outlook within Southeast Asia

The global financial landscape remains turbulent as we enter the second half of 2024. To navigate this uncertain environment, a retrospective analysis of recent market trends and performance is imperative. Robust domestic demand, fuelled by a tight labour market and stable prices, combined with a resurgence in tourism and export growth, underpinned sustained economic expansion during this period.

Market multiples, a cornerstone of valuation analysis, provide crucial insights into the shifting dynamics of equities and businesses. Deciphering the market’s trajectory requires a deep dive into industry-specific market multiples from 1H2023 to 1H2024.

 

Industries’ Multiples Performance

Source: Capital IQ

Source: Capital IQ

Southeast Asia’s emerging economies have shown resilience in recovering from the COVID-19 pandemic. However, the ongoing geopolitical tensions and their repercussions on global food and energy markets have tempered the region’s growth momentum. Disruptions in the supply of commodities are casting a shadow over the region’s development trajectory.

Across all the industry sectors in the Southeast Asia region, EV/EBITDA (“Enterprise Value/Earnings Before Interest, Taxes, Depreciation and Amortisation”) and P/E (“Price/Earnings”) multiples have generally increased on average upon closer look at the performances in 1H2023 and in 1H2024.

A closer examination of EV/EBITDA multiples reveals a balanced picture, a more granular analysis indicates a relatively even distribution of performance across industries. Specifically, five sectors witnessed improvements in their EV/EBITDA multiples, while another five experienced declines over the past year.

A notable surge in P/E multiples was observed across a broad spectrum of Southeast Asian industries. Sectors such as Communication Services, Financials, and Utilities experienced particularly significant increases of 22.2%, 20.0%, and 19.5% respectively. This upward valuation trend is primarily attributable to the region’s sustained GDP growth trajectory, with the resurgence of tourism acting as a key catalyst in most markets.

Source: Capital IQ

 

By further analysing the multiples across the Southeast Asia region, we note that there is generally an overall increase in the P/E Multiples majority of all the industries. We note that the Philippines’ Information Technology sector and Financials sectors have contributed to the increase of P/E multiples with a high median of 35.3x and 26.3x respectively.

Thailand’s median multiples of the Communication Services, Consumer Discretionary, Energy and Health Care sectors can also be observed to be the stronger performing industries compared its Southeast Asian peers.

High P/E median multiples from the Industrials, Materials, Real Estate and Utility sector of 18.1x, 16.6x, 19.9x and 19.7x were contributed by Malaysia, Vietnam, and Indonesia respectively.

P/E multiples from Information Technology sector in Malaysia, Vietnam, and the Philippines have seen a surge primarily driven by the increased digitalisation adopted by businesses and the need for more efficient and secure systems. Furthermore, the government of Vietnam and the Philippines have further cultivated a robust Information Technology sector through the respective government’s efforts that promote digital development and IT infrastructure enhancement.

On the other hand, Energy sector in the Philippines have seen a drastic drop in median P/E multiples between 1H2024 and 1H2023. We understand that the Philippines is confronted with energy challenge due to soaring power demand driven by population growth and economic activity that outpaces the country’s ability to supply clean, reliable energy. The country’s continued dependence on coal for energy generation, coupled with the vulnerability to natural disasters, poses a substantial obstacle to fulfil the country’s energy needs. The financial sector in the Philippines has experienced a substantial decline in median P/E multiple, primarily due to a general economic slowdown that has reduced profitability for financial institutions. Lower economic activity results in decreased borrowing, investing, and spending, which impacts financial institutions’ earnings. Additionally, raising interest rates to combat inflation has squeezed financial institutions’ margins, leading to reduced loan demand and higher default rates.

 

Number of IPOs achieved within the Southeast Asian Region for 1H2023 and 1H2024

An Initial Public Offering (IPO) is when a private company offers its shares to the public for the first time to raise capital. This involves preparing financial statements, meeting regulatory requirements, and filing a registration statement with the relevant authorities like the Singapore Exchange (SGX) or U.S. Securities and Exchange Commission (SEC) etc. The company, with the help of investment banks, determines the initial share price, markets the shares to investors, and then lists the shares on a public stock exchange.

An IPO provides various benefits such as generating significant capital for expansion and debt reduction, enhancing the company’s visibility and credibility, and offering liquidity to existing shareholders. It also ensures a transparent market valuation, aids in attracting top talent through equity incentives, and improves the company’s financial stability and borrowing potential.

In 1H2024, the Southeast Asia IPO capital market achieved a total of 66 IPOs, a 22.4% decrease in comparison to the previous total of 85 IPOs achieved in 1H2023. Indonesia continues to top Southeast Asia in 1H2024 with 25 IPOs, constituting 37.9% of Southeast Asia’s total IPOs for the first half of the year. On the other hand, Indonesia experienced a significant downturn in IPO activity, with a 43.2% decline from the first half of 2023. This sharp decrease can be attributed to investor and corporate caution amid the February 2024 presidential election and anticipated policy shifts.

A comparison of IPO activity in the first halves of 2023 and 2024 reveals a divergent performance across Southeast Asia. While Malaysia bucked the regional trend with a five-IPO increase, the Philippines maintained a steady pace with two IPOs in both periods. The rest of Southeast Asia experienced a notable decline, with complete absence of listings in Vietnam during the first half of 2024. Vietnam’s IPO drought can be attributed to a confluence of factors, such as the tightened listing approval process coupled with a surge in foreign investor withdrawals, driven by both global economic uncertainties and domestic market conditions, has significantly curtailed IPO activity. Facing these adverse market conditions, many IPO-bound companies have deferred their listing plans, preferring to await more opportune market circumstances.

Meanwhile, the Singapore’s IPO market experienced a mixed performance in 1H2024. While the total funds raised declined fromS$27.9 million in 1H2023 to S$26.2 million, the new IPO market capitalization surged from S$136.6 million to S$231.8 million due to a single, larger IPO: Singapore Institute of Advanced Medical Holdings Ltd.

Rising inflation, supply chain bottlenecks, and escalating geopolitical conflicts have combined to dampen global economic growth. These headwinds have created an uncertain environment for the Southeast Asian IPO market in the latter half of 2024 and throughout 2025. The market’s trajectory will depend on government policies fostering growth, domestic political stability, and sustained foreign investment.

 

Let Us Help You!

Our Commercial Advisory and Valuation team is dedicated to assist our clients to make the right decisions on investments, acquisitions and setting up presence in Southeast Asia. Please speak to us to help you navigate through complex regulatory requirements and challenging market developments to achieve your business expansion goals.

 

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CONTACT US

Valuation Advisory Specialists

Grace Lui
Co- Advisory Leader,
Director, Valuation, Transaction Services & Outsourcing
gracelui@sg.cla-ts.com
Karen Lau
Associate Director,
Valuation & Transaction Services
karenlau@sg.cla-ts.com
 Foo Kee Chun
Manager,
Valuation & Transaction Services
fookeechun@sg.cla-ts.com

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