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Taiwan Stock Exchange Jun. 9, 2018

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Taiwan Stock Exchange Jun. 9, 2018 Foreign Listings on TWSE Taiwan Stock Exchange Jun. 9, 2018 1 Big U.S. companies like Apple Inc. and Pfizer Inc. have the world’s largest corporate bond market in their backyard. So why have they been rushing to Taiwan lately to issue debt? The reason: a feature of the Taiwanese bond market that—for now—makes it easy and relatively cheap for companies to redeem any debt they issue there before its due date. For sure, the Formosa bond market—so-called after the Portuguese Issuer Currency Scale name for the island—is tiny compared with the U.S.’s $8.6 trillion corporate bond market. Yet blue-chip companies including Apple, AT&T USD 5,344 mil. Pfizer, Verizon Communications Inc. and Comcast Corp. have each issued north of $1 billion of such debt this year. AT&T Inc. issued a Apple USD 2,377 mil. $1.43 billion 30-year Formosa bond with a 5.5% coupon earlier this month. Pfizer USD 1,065 mil. In the Formosa market, the call option adds only an extra 0.1 Verizon USD 5,214 mil percentage point to 0.15 percentage point in yield, compared with 0.8 percentage point to a full percentage point in other markets, Source: WSJ according to Deutsche Bank’s Mr. Stephen. 2 Outline I. Why IPO? II. Why Taiwan? III. How to List on TWSE? IV. Foreign Listed Companies on TWSE V. Summary VI. Appendix 3 I. Why IPO? 4 Benefits of IPO What Boss Worries ! The cost of regulatory compliance, business succession plan, dilution of shareholding etc. What’s worth-IPO Creates New Values Fund-raising ability Talents • Capital can be used to fund • Easily recruit excellent capital expenditure, R&D or employees by giving them used to pay off existing debt. stock compensation plan. Sustainable Growth Successor Compliance • From private to public, it is • The listings retain professionals easier to transfer ownership for services and comply with either to the successor or regulatory requirements buyer 5 II. Why Taiwan? 6 Features of Major Capital Markets Taiwan capital market best fits for median-size floating considering the Average Market Cap, Turnover Rate and P/E Ratio. Source: WFE and Bloomberg, as of Apr.30, 2018. Mkt Cap No. of Avg. Mkt Cap TurnoverRate P/E Ratio Market Name Mkt Cap. (US$M) Rank Listing (US$M) (Y17) (Dec.31 2017) TWSE 1,077,070.0 18 932 1,155.7 78.4% 15.7 SGX 795,072.0 20 744 1,068.6 28.8% 11.7 HKX 4,443,082.2 6 2,186 2,032.5 49.1% 16.3 NASDAQ 10,375,717.9 2 2,968 3,495.9 126.2% 24.8 NYSE 23,138,626.0 1 2,294 10,086.6 77.5% 23.4 TW 50 Mid-Cap 100 SMEs No. of Mkt Cap Avg. Mkt Turnover 100% Group 17% Listing (US$M) Cap(US$M) Rate 15% 36% TW 50 50 730,545 14,611 41.8% 50% 29% 68% Mid-Cap 100 100 164,821 1,648 108.5% 35% 0% Other SMEs 754 177,500 235 152.9% Mkt Cap Trading Vol. 7 Here are some facts about NASDAQ • Average market cap of a NASDAQ listing company is about US$ 3.26bn. • TOP 25% listings accounted for 94% of the total market cap, as well as 92% of trading value. • LAST 25% (about 700 Co.) listings’ avg. mkt. cap is below US$ 33M. • Compliance cost in the US is quite a burden for SMEs. • ICT & SMEs are more than welcome by TWSE. NASDAQ equity markrt summary Top 10 listings of NASDAQ 0.22% Name Mkt Cap. P/E Top 25% 1 APPLE INC 871.81 18.45 5.82% 2 ALPHABET INC-CL A 698.13 30.24 medium 0.44% 3 MICROSOFT CORP 625.50 30.43 7.65% Top 25% Last 25% 4 AMAZON.COM INC 546.42 289.25 Mkt Cap medium 5 FACEBOOK INC-A 500.42 33.49 Trading Last 25% 6 INTEL CORP 208.21 12.95 93.97% Value 7 COMCAST CORP 188.45 19.66 8 CISCO SYSTEMS INC 186.47 17.96 91.91% 9 AMGEN INC 129.71 14.64 10 NVIDIA CORP 113.12 47.84 Source: Bloomberg, period: 2016/12/6-2017/12/6 Source: Bloomberg, Dec. 6, 2017, Unit：US$ bn 8 Multi-Layer Equity Market • 757 Stocks Founded in 1994 • 17 ETFs Founded in 1962 • 1 TDRs • More than 4,000 MAIN BOARD warrants Mkt. Cap. US$ 1 tn. • Mkt. Cap. US$ 113 bn T：17 TDRs 2002年 W：upward of 10,000 warrants Emerging Board S：932 Stocks • 256 stocks, Mkt. Cap. E：107 ETFs US$ 25.8bn 2014年 Go Incubation Board 2013年 2015年 Gofunding Zone Equity-Based Crowd Funding As of April 2018. 9 Significant Presence of Global Investors 40 45 39.94 39.6% 38.29 38.55 40 35 41.25 33.99 34.02 34.63 30.4 32.44 31.89 32.86 32.34 35 30 30.4 28.4 25.9 26% 24.6 30 25 24.3 23.8 21.8 22.6 19.6 25 20 18.4 18.5 16.4 20 15 15 10 10 5 5 0 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Apr-18 Trading value from foreign investors (%) Market value held by foreign investors (%) Source: TWSE. 10 Diversified Funding Strategies Ever-Lasting Fundraising sustains Listings’ Development Unit: NT$ 100Million IPO SPO GDR BOND 400 350 40 300 138 250 227 200 37 136 130 150 116 12 132 46 42 100 209 27 8 14 15 16 58 98 13 50 81 72 50 76 55 44 0 2010 2011 2012 2013 2014 2015 2016 2017 As of May 2018, the amount of fund raised by foreign listings accounting for NTD 691 bn. (US$ 2.3 bn.) and NTD 659 bn. (US$ 2.2 bn.) through IPO and Increasing Capital respectively. We see the follow-on offering is popular in Taiwan’s market; furthermore, upwards of 40% foreign listed companies, besides IPO, float subsequently. Source: TWSE. 11 Foreign Listings Outperform the TWSE Index Increasing No. of Foreign Listings, Foreign Listings Outperform especially from ASEAN the TWSE Index As of Apr. 2018, Unit：no. of IPOs As of Apr. 2018, Unit：%, US$ bn, times Issuers based on China Issuers based on ASEAN Foreign Issuers based on USA No. of Foreign Listings TWSE 16 80 Listings 69 70 14 70 70.94% 30.63% 59 Turnover 12 1 50 60 Market Cap 32(A) 1,073(B) 10 41 1 1 50 8 36 1 40 A/B is only 3.0% 4 Trading 6 26 1 30 23(C) 329(D) Value 4 3 18 20 C/D is up to 7.0% 2 6 10 3 11 8 10 6 9 8 5 1 P/E Ratio 18.51 15.36 - 0 2010 2011 2012 2013 2014 2015 2016 2017 A-18 12 Diversified Foreign Listings No matter your location, nationality and industry, TWSE is the one! Upwards of 80% have operations Both ICT and non-ICT, float in China and US is the 3rd shares and achieve fair value Technology 43% USA ASEAN 9%7% ICT 33% China 83% 10% Biotech ICT, 23 Biotech, 7 China, 60 ASEAN, 6 Electric Machinery, 8 USA, 5 Others, 1 Trading and Consumers' Goods, 7 Note: As of Apr. 30, 2018. Others 13 III. How to List on TWSE? 14 Listing Requirement Criteria General Unicorn High Tech Agriculture Duration of 3 years 3 years 3 years 1 year Existence • Paid-in capital or Net- • Market Cap to be listed is • Market Cap to be listed is • Paid-in capital or Net- worth: NT$600 mil. NT$5 billion or more, and NT$6 billion or more, and worth: NT$300 mil. (appx. Company (appx. USD 19 mil.) Paid-in capital or Net- Paid-in capital or Net- USD 9.7 mil.) Size • Market Cap.: NT$1.6 bn worth: NT$600 mil. (appx. worth: NT$600 mil. (appx. • Market Cap.: NT$0.8 bn (appx. USD 52 mil.) USD 19 mil.) USD 19 mil.) (appx. USD 26 mil.) • No accumulated deficit The revenue for the The revenue for the • Net worth shall not be • Cumulative net income recent fiscal years is NT$5 recent fiscal years is NT$3 lower than 2/3 of the before tax for the most capital billion or higher and billion or higher and recent 3 years is better than figure in • Working capital is better than figure in NT$250 mil. (appx. USD preceding year sufficient for 12 months 8 mil.) preceding year The positive net cash • Net income before tax The positive net cash flow Profit. flow from operating for the most recent from operating activities activities for the most year is NT$120 mil. for the most recent fiscal (appx. USD 4 mil.) recent fiscal years is years is positive positive Net worth shall not be Net worth shall not be lower than 2/3 of the lower than 2/3 of the capital capital • Designate a litigious and non-litigious agent in Taiwan Others 15 • At least 1 of the independent directors shall be domiciled in Taiwan Clear Review Points Assure Quality IPOs Information Disclosure • Board of Director • Sound regulatory • Corporate social responsibilities framework par with Corporate international standards • Shareholder protection Governance Compliance • Internal control system • Financial reports establishment Internal Financial present fairly in all • Consistency of cash Control material respects flow and order • Opinion of CPAs delivery Competitive R&D Niches • Patent & certification • Peer comparison • R&D & talents • Sales validity 16 Efficient Application & Review Process • Foreign listings take only 3-5 months to finish listing application.
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