The Business Herald’s markets and banking reporter.

Stock Takes: IPOs sprout up in fertile market

A number of floats said to be in the pipeline.
NZ King Salmon is considering a transtasman listing.
NZ King Salmon is considering a transtasman listing.

New Zealand's initial public offering pipeline is showing some green shoots after a quiet 18 months.

The local sharemarket remains buoyant, with the S&P/NZX 50 up around 12 per cent for the year and hitting new records despite everything from the China-related jitters of January to the short-lived Brexit-driven upheaval of last month.

With interest rates low, investors are piling into equities in search of yield.

Meanwhile, company valuations are high and getting ever higher.

All in all, it makes for a pretty good IPO environment.

Following Tuesday's float of Stride Property spin-out Investore , the second NZX IPO of the year, a number of companies are understood to be waiting in the wings.

They include aquaculture operator New Zealand King Salmon, which is testing the waters with investors around a transtasman listing that could value the Nelson-based firm at up to $200 million.

A market source said much work was going on behind the scenes on that deal and it was likely to go ahead "in weeks rather than months".

Another property company and a logistics operator are said to be eyeing up potential floats.

London-listed Arria NLG is still understood to be planning a NZX listing and IPO that may raise around $20 million.

The British technology company was initially expected to come to market this month, but a source said that deal was now more likely to take place in October.

The private equity owners of home ventilation operator HRV, meanwhile, are reportedly considering an IPO as an exit option.

Then there's container maker and depot operator ContainerCo, which has hired investment bankers Cameron Partners to provide advice including around its capital requirements. An IPO is likely to be an option in that case.

Further out, FAB Group - the franchiser of the Caci Clinic skincare treatment chain - has beefed up its board ahead of an IPO planned for 2019.

Market rebirth

Many investors will have felt a sense of deja vu when Auckland-based FAB, owned by Jackie and David Smith, announced its listing plans on Monday.

The Smiths listed a previous iteration of the company, Caci Group, on NZX's New Capital Market - the predecessor to the NZAX - in 2000.

It listed at 50c a share, but after a lacklustre market performance, a 38c takeover offer from the Smiths was accepted by shareholders in 2007, and it went back into private hands.

"We have never provided a sufficient return on shareholders' funds to warrant remaining a listed public company," David Smith said in 2007, ahead of the takeover.

Things are going to be different this time around, of course. Much emphasis will be placed on how the company has had a facelift through moving into the distribution of skincare products, as well as its plans for international expansion.

Franceska Banga, who has been appointed as FAB's independent chair, said the company operated in a sector "underestimated in terms of the opportunities".

But a sharemarket rebirth can be difficult, particularly when investors didn't have a great experience the first time around.

One market insider said investors would take a lot of convincing to get back on board the Caci bus.

"You'd have to think they have quite a job ahead of them," he said.

Good thing FAB seem to have given itself plenty of time.

'Fessing up

Companies will begin reporting next month on how well they have fared over the year or six months to June 30, while also providing forward guidance.

In the lead-up, investors will be on the lookout for disappointing pre-announcements during the so-called "confession season".

Shane Solly, a director at Harbour Asset Management, said companies with Australian exposure could be feeling pressure as a result of the economic situation across the Tasman and the New Zealand dollar's strength against that country's currency.

The kiwi is also trading at elevated levels against the greenback and hit a 14-month high on a trade-weighted basis on Monday.

"This will be the period of time in which companies come out with confessions or not," Solly said. "The European economy, the Australian economy and foreign exchange are the three things we're focused on."

- NZ Herald

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