Fund managers are getting excited about the possibility of more initial public offers starting to line up for the New Zealand sharemarket.
Yesterday, a strong debut by medicinal cannabis company Rua Bioscience broke a one year-plus drought for equity listings on the NZX.
And two other companies look like strong possibilities - if not for this year, then early in 2021.
Sam Trethewey, portfolio manager at Milford Asset Management, says there are a few potential IPO candidates.
Two that have been made public so far are food delivery business My Food Bag and the New Zealand Rural Land Company.
Trethewey says he would certainly like to see My Food Bag come to market. "It's an interesting proposition for a listed company. It would add some good diversity to the NZX."
The NZ Rural Land Company is being pitched by investment market stalwart Chris Swasbrook, with the help of investment bankers Jarden, and is looking to raise between $75 million and $150m.
Rural services company Allied Farmers says it has signed a conditional agreement to pay $2.5m for half of NZ Rural Land Management Limited Partnership (NZRLM) - a new entity established this week to manage NZRLC.
The NZ Rural Land Company will acquire rural land under a landlord model, and lease it to farming operators.
Trethewey says NZRLC seems to have quite a complex structure. "It may change closer to the IPO, but at this stage there is quite a few layers for investors to get their heads around."
Trethewey says he expects the NZ Rural Land Company to list before the end of this year but timing for My Food Bag is more up in the air, given that it is following a dual track process of either a possible trade sale or listing.
Duke buys more Briscoe
The trust of Briscoe managing director Rod Duke has snapped up another 229,650 shares in Briscoe Group for $916,786.
The RA Duke trust now owns 171, 566,383 shares or about 77 per cent of the company.
Duke told the Herald the trust decided to buy the shares because was basically the best place to put its cash.
"Right now a lot of equities look overheated, a lot of property looks damn expensive with very, very low yields and none of the major banks even want the money."
Duke says Briscoes is offering a good yield and because the trust knew a fair bit about the company it decided to invest in more shares.
But he has no plans to take the company private.
"We have had none of those discussions."
Duke says that talking to friends in the investment banks, it seems term deposits are dead and returns on on-call money are non-existent.
"With bonds coming off or getting changed there is just so much cash out there at the moment simply unable to find a home."
Asked about where the money would go, Duke speculates that it is ending up in the property market.
"I just wonder whether or not, because there is this abundance of cash, whether or not that is going into real estate and for rental properties and that is why that is suddenly getting overheated.
"But my point of view is we know a lot about Briscoes, we know its prospects, it's got an attractive yield at the moment - I think from memory it's about 5 per cent - which is not bad - you are struggling to get one and a half in the banks."
Briscoe Group is due to report its third quarter sales to October 25 around November 3.
Future of AMP Capital NZ?
The future of AMP Capital in New Zealand may have just got cloudier after its sister company AMP Wealth Management New Zealand ditched it this week from managing investments in its KiwiSaver and New Zealand Retirement Trust schemes.
Instead, AMP Wealth will go with global passive investment manager BlackRock. AMP Capital has offices in Wellington and Auckland and had around $22b in funds under management as of June, according to its last investor report.
The AMP KiwiSaver scheme has $6.2b invested through it while the corporate superannuation master trust has $3.42b. Exactly how much of that money is managed by AMP Capital is unclear, but the loss of the mandate is sure to be a blow to the fund manager.
Asked what impact the change might have on AMP Capital in New Zealand, a spokeswoman said AMP Capital NZ would continue to provide active investment management options on NZWM's WealthView platform, as well as a range of investment solutions for other external clients, across real estate and infrastructure as well as in fixed income and global equities.
The funds won't shift to BlackRock until June next year and AMP Capital is expected to use the transition period to work through and minimise the impacts on its business.
Dual NZX/ASX- listed AMP, the parent of both AMP Capital and AMP Wealth Management, is already in the midst of a restructure process with a sale or possible break-up of the business on the cards.
Who wants to buy a life insurer?
A third New Zealand bank looks set to sell its life insurance arm.
National Australia Bank is said to be in talks to sell BNZ life, according to the Australian Financial Review's Street Talk column.
Potential buyers could include AIA, which is the largest life insurer in New Zealand, Resolution Life, which recently bought AMP's life insurance business, and Partners Life.
A BNZ spokesman said it didn't comment on speculation.
The sale is unlikely to run into any competition issues with the Commerce Commission given the small size of the BNZ business.
The life insurance industry has been stagnant in New Zealand for some time and is facing challenges from increased regulation as well as pressure from regulator the Reserve Bank to increase its capital levels.
If the sale goes ahead, BNZ will be following in the footsteps of its rival banks. ANZ sold OnePath Life to Cigna Corporation for $700 million in 2018.
And ASB's parent company, the Commonwealth Bank of Australia, agreed to sell its life insurance businesses in New Zealand (Sovereign) and Australia to AIA for A$3.8b.
As part of that transaction, ASB said it would enter into a 20-year distribution agreement with Sovereign and AIA for the provision of Sovereign and AIA life insurance products to its New Zealand customers.
Forsyth Barr analysts Jamie Foulkes and Ashton Olds have initiated coverage of Heartland Group, which owns New Zealand's only locally listed bank, Heartland Bank, with an underperform rating.
The pair say the company faces margin pressure, slowing loan growth, increasing costs to income and elevated impairment expenses.
"We also believe there are a number of regulatory, competitive and economic headwinds ahead."
Last month Heartland secured a A$142m ($154m) million funding line allowing it to continuing expanding its reverse mortgage business in Australia.
But the analysts say the Australian reverse mortgage market has been subject to increasing competitive pressure, pointing to the entry of Legal & General.
They are also worried about the group's return on equity.
"HGH [Heartland Group Holdings] has invested heavily in a digital strategy in recent years, raising its cost to income ratio and lowering [return on equity]. While this should theoretically lower HGH's cost base, we believe earnings accretion to be highly uncertain."
There are also concerns that Heartland's part-ownership of lender Harmoney could see it experience a significant increase in non-performing loans if there is another downturn in the economy.
"This is partly due to HGH's relationship with Harmoney, where HGH absorb any credit losses incurred through Harmoney yet holds no direct control over the business.
"Given the risk profile of Harmoney (loans charged up to 40% interest) we see this as an oversight by HGH."
The analysts have a 12-month target price of $1.35 on the stock which opened at $1.37 yesterday (Thursday).