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  • 🔔 TDB IPO | SECONDARY TRADING TRENDS | TOP 100 COMPANIES

🔔 TDB IPO | SECONDARY TRADING TRENDS | TOP 100 COMPANIES

Oldest commercial bank goes public. Business community burgeons. Stocks hike in secondary market.

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Zolbayar Enkhbaatar & Bilguun Amarbayar
May 22, 2023 • Estimated Reading Time: 11 minutes

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🤔 DID YOU KNOW?

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Mongolian horsemen are alleged to have invented ice cream. They used to take cream in containers made from animal intestines for supplies during long journeys across the Gobi Desert in winter. When they galloped, the cream was vigorously shaken, while it simultaneously froze in the sub-zero temperatures.

🔔 TRADE AND DEVELOPMENT BANK RAISES $25 MILLION IN OVERSUBCRIBED IPO

Mongolia’s first commercial bank, Trade and Development Bank (TDB), has raised ₮85.5 billion ($25 million) in an oversubscribed initial public offering that underscores the country’s banking reforms.

TDB, which marked its 33rd anniversary this year, sold 5% of its equity to the public at ₮33,000 per share, reaching its target within two days of the subscription period that ends on Tuesday. It puts the total valuation at a whopping ₮1.67 trillion ($483 million).

Financial powerhouse

  • Reliable: TDB is a dominant player in Mongolia’s corporate lending market, accounting for 43% of all loans to companies last year. The bank has issued five international bonds (it is also the first in the country to issue one) and secured $1.1 billion in medium- and long-term financing.

  • Global: It has a strong international presence, with ties to 300 banks and financial institutions worldwide. It handled 32% of Mongolia’s cross-border transactions and 27% of its trade investments in 2022.

  • Green: TDB has been a pioneer of green finance in Mongolia since 2012, investing more than ₮1 trillion in projects such as energy efficiency, ger district improvements and renewable energy. It aims to become green and sustainable by the end of this year and adopt a climate change risk governance transparency system by 2025. The funds raised by the IPO will be used for these initiatives.

The IPO comes as TDB’s total assets exceeded ₮10 trillion for the first time. Its interest income rose 7.2% to ₮163.8 billion last year, while its net profit jumped 45% to ₮47.4 billion.

Mirae Asset Securities is the lead underwriter and TDB Securities is the co-underwriter for the IPO. EY Mongolia is the financial auditor and BDO Audit is the valuation adviser. DB & GTS is the legal adviser.

📈 DATA STORY: STOCKS SURGE IN SECONDARY MARKET

The last five companies to list on the Mongolian Stock Exchange have seen their share prices rise by an average of 18.9% in the first 11 days of trading, but with mixed fortunes.

State Bank: volatile debut

State Bank (SBM), the first of the top five banks to go public, saw its shares jump 15% in the first four days, then drop by the same amount in the next four. The stock has since fallen by a further 19% from its peak and 3.7% from its IPO price, settling at around ₮567.99.

Golomt Bank: downward trend

Golomt Bank (GLMT) has fared worse, losing 7.3% of its value since its listing. Its bonds reached a high of ₮1.1 trillion ($312 million) on the first day of trading but have since declined by 23% to ₮812.7 billion.

MSE: stellar performance

The Mongolian Stock Exchange (MSE) itself has been the star performer among the recent IPOs, with its shares soaring 60.3% in the first 11 days. Although they have retreated 15.5% from their record high of ₮180.2, they are still 50.4% above their IPO price.

Gazar Shim: stable but dull

Gazar Shim (GAZR), a food company, has seen little movement in its share price, which closed at ₮52.91 yesterday, almost unchanged from its listing price. The stock has suffered from weak trading activity.

Khan Bank: solid gains

Khan Bank (KHAN) has delivered a 21% return to its investors since its debut on the exchange. It became the first bank with a market capitalization of more than ₮2 trillion ($567 million) on the first day of trading, when its shares rose 14.9%. They have since added another 5.7%.

The recent IPOs on the Mongolian Stock Exchange have showcased the potential of the country’s economy. Some companies have delivered remarkable returns, while others have faced some challenges. The market is still evolving and offers many prospects for investors who are willing to overcome some obstacles, such as regulation, politics and environment. At the same time, as with any investment, proper due diligence is a must.

🕶️ MONGOLIA’S TOP 100 COMPANIES REFLECT REVIVING BUSINESS COMMUNITY

The Mongolian government and the Mongolian National Chamber of Commerce have published their annual ranking of the country’s top 100 companies for 2022. The ranking is based on five criteria: revenue, tax contribution, number of employees, net profits and size of assets.

Key observations

  • The service sector dominated the list with 35 entries, followed by mining and petrol with 15 each. Food and financial sectors had 10 and 7 companies respectively.

  • Mining remained the biggest revenue generator, accounting for 28% of the total revenue of the top 100 companies, while financial services had the highest profits at 33%.

  • Only nine of the top 100 companies were listed on the Mongolian Stock Exchange. The government has said it wants to encourage more public offerings by easing regulations and providing support.

  • MCS Group, a private conglomerate, confirmed its status as the largest group company in Mongolia with 10 subsidiaries in the ranking, followed by Shunkhlai Group with nine and Tavanbogd with six.

One notable trend was the decline in the share of revenues by the top 100 companies in Mongolia’s gross domestic product from 96% in 2018 to 73%, suggesting a growing role for small and medium enterprises and a reduction in economic concentration.

The ranking has mainly a symbolic value for individual companies, but it offers a useful snapshot of the Mongolian economy beyond its reliance on mining. While mining remains a key driver of the economy, other sectors such as services, food and finance are also making their mark. The government has a role to play in fostering a more conducive environment for public listings and supporting small and medium enterprises.

Note: This year’s list includes only enterprises with majority private ownership. This complicates direct comparisons with previous years’ data.

🏃 QUICK STORIES

📌 Fitch affirms Mongolia’s Long-Term Foreign-Currency Issuer Default Rating at ‘B’ with a Stable Outlook. Strengths: governance indicators, per capita income and medium-term growth prospects. Risks: high external vulnerabilities, subdued near-term growth and sizeable budget deficits.

📌 Mongolia’s domestic trade revenue has surged 27.4% year on year to $2.65 billion, driven by robust growth in food, retail and fuel sectors. Food sales, which accounts for 24.1% of the total revenue, has risen 25.6% from a year earlier, reflecting the recovery of consumer demand and economic activity.

📌 Macron seeks to boost ties with Mongolia in landmark visit. The French president arrived in Ulaanbaatar on 21 May for a two-day trip to deepen bilateral relations across a range of sectors, from energy and transport to health and agriculture.

📌 The European Bank for Reconstruction and Development has lent $20 million to Khan Bank to support women-owned and women-led businesses. The loan will help female entrepreneurs access funding, advice and a risk-sharing mechanism under the bank’s Women in Business programme.

📌 Lhamour, a Mongolian cosmetics brand that uses natural ingredients from the country’s vast grasslands, will showcase its products at two upcoming events in New York City: Adit Live Trade Show, a global platform for independent beauty and wellness brands, on May 24-25, 2023; and Foundermade Innovation Show, a D2C space for disruptive industry leaders, on May 31, 2023.

📌 Central Bank of Mongolia has set up a data centre with international Tier II certification, the first among government bodies. The project will bolster the country’s digital shift and safeguard the national payment system. The Uptime Institute, a global data centre watchdog, awarded the accreditation.

⭐ TOP NEWS

  • Macron says Mongolia to supply critical metals for green push (Bloomberg)

  • Macron makes first French presidential visit to Mongolia (AFP)

  • Karakorum: Mongolia’s ancient capital is a cultural delight (CNN)

  • Emmanuel Macron makes first French presidential visit to Mongolia (South China Morning Post)

  • Will North Korea’s foreign minister visit Mongolia this year? (The Diplomat)

  • Shift in Mongolia’s Buddhist leadership to determine its relationship with China (Deviscourse)

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Editor: E. Zolbayar
Writer: A. Bilguun

Disclaimer: The information Inside Mongolia provides is for educational and informational purposes only. It is not intended to be and does not constitute financial advice, trading advice, or any other advice. The decision whether to consider the information we provide is solely our readers' independent decision.