Investment columnist for the NZ Herald

Brian Gaynor: Investors hungry for fresh meat on NZX

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Martin Aircraft, whose jetpack has piqued military interest, is intending to raise funds through IPOs later this year. Photo / Supplied
Martin Aircraft, whose jetpack has piqued military interest, is intending to raise funds through IPOs later this year. Photo / Supplied

NZX's Investor Day attracted a large number of investment managers, private investors and investment bankers in Wellington on Monday.

Most of us were there in the hope that the long drought would end, a drought that has seen a paucity of new NZX listings.

The NZX has had only 89 new listings over the past decade, representing just 0.4 per cent of the world total of 21,413 (see accompanying table). These figures are for domestic companies only which avoids double counting.

In comparison Australia had 1390 new listings or 6.5 per cent of the world total over the same 10-year period.

The NZX and ASX are going in opposite directions as our exchange had 73 new issues in the first five-year period and only 16 in the last five years. By comparison the ASX had 662 new listings in the 2001-05 period and 728 in the five years ended December 2010.

The scarcity of new listings doesn't help the New Zealand economy because stock exchange listings give companies far greater opportunities to grow, create jobs and make a meaningful contribution to economic activity. The positive features of an NZX listing include:

* It enables companies to raise capital to grow their businesses.

* It forces companies to adopt higher standards of corporate governance, disclosure and lift their performance in other areas.

* It creates a market for the founders' shares that enables them to diversify their asset base.

* It encourages companies to have widespread staff ownership because it creates a market for staff shares.

* Astute companies can use a stock exchange listing to promote their business and generate additional revenue.

* A listing gives companies greater financing capabilities, both in terms of equity and debt.

* Listed companies can expand by acquiring additional companies through the issue of shares.

Unfortunately New Zealand businesspeople and investors do not fully recognise the huge opportunities associated with a stock exchange listing.

There is far too much focus on the negative - Feltex for example - and not enough emphasis on the successful listed companies. These include Infratil, Mainfreight and Ryman Healthcare among others.

The sharemarket returns of these three companies have been spectacular as the following figures illustrate;

* Infratil has had total investor returns, including capital and dividends, in excess of 900 per cent since listing in 1994.

* Mainfreight, which was listed in mid-1996, has had total returns in excess of 1000 per cent.

* Ryman Healthcare has had total returns of more than 900 per cent since listing in mid-1999.

The NZX Investor Day attracted a large number of attendees searching for the next Infratil, Mainfreight or Ryman Healthcare for their clients.

Here is a brief description of the six companies that presented on Monday.

Phil & Teds

Phil & Teds, which is 95 per cent owned by former Fay, Richwhite staffer Campbell Gower, is focused on the juvenile market. It manufactures a wide range of buggies, car seats, feeding chairs and other items for young children.

These are mainly produced in four factories in China that are contracted to make only Phil & Teds' products.

Gower is determined to be unique and to stand out in an extremely competitive consumer market. His focus is to have a strong brand, increase sales, control costs and pay higher dividends.

The company is based in Wellington, has sales in 45 countries and one-third of its staff are overseas.

Phil & Teds has grown strongly and is understood to be highly profitable. Gower didn't mention stock exchange listing in his address and later indicated to Radio New Zealand that he had little interest in an NZX listing.

Masterpet

Wellington-based Masterpet, which is 29 per cent owned by Paul Collins' Active Equities and 25 per cent by Brent Wootton of the founding family, has turnover of $140 million.

The pet market is now larger than the baby market with 3.4 million dogs in Australia and 0.7 million in New Zealand. There are 2.4 million cats in Australia and 1.2 million on this side of the Tasman. The company has good growth prospects on both sides of the Tasman, particularly as retiring baby boomers have a strong interest in pets.

Masterpet doesn't need additional capital but a number of its shareholders are looking to cash up. This will be through a trade sale, a private equity sale or an IPO with the latter in the September 2012 quarter at the earliest.

Imarda

Imarda is controlled and driven by Selwyn Pellett who successfully listed Endace on the London Stock Exchange in 2005.

Pellett's new company develops fleet management systems, mainly for trucks, using telematics technologies.

Its GPS Fleet Management System allows fleet companies to access valuable information on the performance of their trucks on a real-time basis.

Imarda sees huge worldwide opportunities for its products because the sector is fragmented and is not dominated by any one IT provider.

In many ways Pellett is similar to Rod Drury, the founder and driving force behind Xero.

Both men have had previous entrepreneurial success and they want Xero and Imarda to be successful global companies.

Imarda hopes to list this year and the success of Drury and Xero should encourage investors to participate in this IPO.

Jucy

Jucy is the high-profile campervan and rental car company which is 80 per cent owned by Chris Alpe and 10 per cent each by his sons Tim and Dan.

The company has 1000 rental cars and 1500 campervans in Australia and New Zealand and is expanding into California.

It customises its own vehicles in Helensville, has a hotel in Auckland, operates cityhop and the Jucy Cruise in Milford Sound.

The Alpe brothers are ambitious and draw on the expertise of their father who started Maui Campervans, now owned by THL.

Jucy, which has revenue of $32 million and ebitda below $10 million, is planning to have an IPO that coincides with the Rugby World Cup.

Martin Aircraft

The major shareholders of Martin Aircraft, the developer of the Martin Jetpack, are founder Glenn Martin and Jenny Morel's No 8 Ventures.

The jetpack is in its early development stages but it can operate for up to 30 minutes at a 4 metre altitude manned and 10 metres unmanned.

Chief executive Richard Lauder says there is considerable interest in the jetpack, particularly from military sources.

The company needs to raise $2 million pre-IPO and will be looking to raise around $10-$15 million in an IPO later this year.

Opus Print Group

Opus Print Group is 69 per cent owned by Parnell-based private equity firm Knox Investment Partners.

The print company, which has turnover in excess of $100 million, specialises in high-speed digital printing in the commercial, out-of-home and government markets in New Zealand and Australia. It publishes the Budget for the Australian Government, which is one of its largest customers.

Opus has an ebitda margin of around 20 per cent and is expanding in Asia, mainly Singapore and Hong Kong at this stage.

Opus said it was looking at a number of options, including an IPO.

All six companies that presented on Monday would make a welcome addition to the NZX although the IPO pricing and financial forecasts will ultimately determine how attractive they are.

At this stage Jucy looks as if it will be first off the block to be followed by Martin Aircraft and Imarda.

The other three are less likely IPO candidates with Phil & Teds unlikely to list in the near future.

Disclosure of interest: Brian Gaynor is an Executive Director of Milford Asset Management.

- NZ Herald

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Investment columnist for the NZ Herald

Brian Gaynor has written a weekly investment column for the Weekend Herald since April 1997. He has a particular passion for the NZX and its regulation. He has experienced - and suffered through - the non-regulated period prior to the establishment of the Securities Commission in 1978 and the Commission’s weak stewardship until it was replaced by the FMA in 2011. He is also a Portfolio Manager at Milford Asset Management.

Read more by Brian Gaynor

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