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Christopher Adams ' Opinion

The Business Herald’s markets and banking reporter.

Stock Takes: Next tech IPO?

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Glenn Milnes of ikeGPS with the firm's new Spike device, which attaches to a smartphone
Glenn Milnes of ikeGPS with the firm's new Spike device, which attaches to a smartphone

New Zealand tech company ikeGPS may carry out a stock exchange listing later this year when it looks to raise up to $40 million in expansion capital.

The Wellington-based firm has developed a device costing more than $10,000 for businesses such as electricity utilities to photograph, measure and GPS locate objects such as telegraph poles.

Its shareholders include Jenny Morel's No8 Ventures, the government-backed New Zealand Venture Investment Fund and US conglomerate General Electric.

Managing director Glenn Milnes said the company was looking at "a whole range of growth financing options", but he wouldn't rule out an NZX-listing.

Venture capital firms in the US were another option, he said, adding that funding rounds in the range of $20 million to $40 million were the "sweet spot" for such companies.

IkeGPS is about to launch a new product called Spike, which attaches to a smartphone and offers similar technology to its main device but at the more affordable price of about $500. Tradespeople such as painters could use the device to measure buildings when giving quotes.

IkeGPS raised more than US$200,000 ($232,200) through crowdfunding website Kickstarter, which it used to fund Spike's development.

Calm waters for M&A

A broker reckons the Goodman Fielder takeover is unlikely to herald the start of a major lift in acquisition activity on the NZX.

Singapore's Wilmar International and Hong Kong's First Pacific launched a A$1.7 billion ($1.83 billion) bid for the food manufacturer on Monday.

Sydney-based Goodman Fielder, which is listed on both sides of the Tasman, said the offer "materially undervalues" the company and the would-be buyers would probably have to lift their offer for it to be successful.

Grant Williamson, of sharebrokers Hamilton Hindin Greene, said the valuations of many NZX companies were too high to attract takeover offers.

"[Most] companies are trading on relatively high fundamentals so I don't think we'll see a lot of takeover activity," Williamson said. "I think Goodman Fielder was probably a little bit different given the fact it's been a serial underperformer for quite some time now."

The food company's shares were trading at A67.7c on the ASX yesterday, 4.1 per cent above the A65c takeover offer. The offer price represents an 18 per cent premium on last week's closing price of A55c on the ASX.

High value, high risk? High something...

Yes, we're starting to get sick of all the cannabis business stories billowing off the US news wires too. But a snippet from the FT provides an interesting example of just how serious Americans are getting about the pot industry. The High Times Growth Fund was launched at the New York's upmarket Waldorf Astoria, the FT reports. It's seeking to raise up to US$300 million to invest in the fast-growing industry which, up to now, has been largely funded by pot shop owner-operators.

With the synthetic variety banned from New Zealand shelves this month and Prime Minister John Key ruling out law reform for the natural stuff, local investors hoping for these kinds of high-value options will hold their breath for now.

F&P looking healthy

Craigs Investment Partners remain bullish on Fisher&Paykel Healthcare, despite independent research labelling the stock's valuation "stretched".

Morningstar analyst Nachi Moghe said in a recent note that health-related stocks, including the Manukau-based medical technology manufacturer, were more than pricing in their growth prospects and New Zealand's "love affair" with such companies could turn sour if valuations went through a correction.

"While we see no imminent catalysts for repricing, other than rich valuations, we believe investors should be cautious and wait for a decent pull-back before initiating positions," Moghe said.

But Craigs' head of private wealth research, Mark Lister, disagrees with that view on F&P Healthcare, where shares doubled in value in the past two years closing at $4.05 last night.

"We think it's good value at under $5," Lister says. "We're happy to buy Fisher&Paykel Healthcare at these levels."

He said the company - which struggled with the strong NZ dollar but has since returned solid financial results despite the kiwi trading above US80c - had delivered seven earnings upgrades in a row.

"They've got some pretty serious earnings momentum on their side and that's happening without any currency weakness," Lister said. "You're seeing the currency at record levels but the company, which exports 90 per cent of its products, still continues to deliver." Any reduction against the greenback would be the icing on the cake.

Retirement moves

Lister agrees with Morningstar that other healthcare stocks - including retirement village operators Ryman and Summerset - are looking a tad expensive at current levels.

But Craigs is a "little more favourably disposed" to Metlifecare, he says.

"Metlifecare is our preferred exposure [of the listed retirement village operators] based on where the current valuations lie. We think Metlifecare looks good around the $4 mark."

Shares in the Auckland-based company, which gained more than 13 per cent in the last year, closed at $4.11. Ryman closed at $8.75, Summerset at $3.47.

- NZ Herald

Christopher Adams

The Business Herald’s markets and banking reporter.

A business journalist for more than four years, he also writes the weekly Stock Takes column.Christopher’s main focus is the local sharemarket and issues facing Kiwi investors. He covered manufacturing and retail in his previous Herald role and maintains a special interest in New Zealand’s growing trade relationship with China.

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