KEY POINTS:
MELBOURNE - The number of company floats next year is expected to lift from a record low in 2008 as economic stimulus packages boost the share market.
PricewaterhouseCoopers (PwC) said yesterday that 30 to 40 initial public offers (IPOs) were expected next year, compared to just 25 or
26 for the full year to December 31. IPO activity in 2009 would remain well below the average level in Australia, however. PwC partner Greg Keys said IPO activity in the first half of 2009 was expected to be quiet but would pick up later.
"Increased activity in the second half of 2009 should be boosted by pending falls in interest rates, together with some fiscal stimulation from the government, both of which will provide a much-needed stimulus to the economy and equity markets," he said.
Investors were keen to see companies reduce debt and re-capitalisations to that end were likely to attract support.
"Accordingly, we expect the Australian equity market to stabilise during mid to late 2009 with a consequent re-emergence of activity, particularly for listings with sound fundamentals ..." he said.
Consumer and industrial products companies with a solid record of earnings should attract the best support, he said.
PwC said IPO activity for the 11 months to November 30, 2008, had been stagnant as the global financial crisis shattered investor confidence and companies suspended listings.
Only 24 IPOs raising A$796 million ($960.88 million) were completed in the 11 months to November 30, compared to 68 raising $7.8 billion in the corresponding period in 2007. The top five floats so far in 2008 had raised $692 million - under 15 per cent of the $4.6 billion generated by the top five listings in the same period in 2007.
Median funds raised per company had fallen to just $5.6 million so far in 2008, compared to $15.6 million in 2007.
The median market capitalisation of companies listing on the stock exchange had more than halved: $59 million in 2007, compared to $24 million in 2008. Of the 24 floats to November 30, 2008, only two had held or exceeded their issue price since listing. Five of the 24 listings were small renewable energy and clean-technology companies.
Listing activity in other sectors fell markedly. In the financial services sector, there had been only three floats so far, compared to 11 listings for the corresponding period in 2007.
Mr Keys said the cost of capital was reshaping investor risk profiles.
"Twelve months ago, investors were prepared to take positions in riskier assets," he said.
"Now we are seeing a flight from the market to cash under the Australian government's bank deposit guarantee, which offers relative stability and certainty of income yields."
- AAP