CBL Insurance appears to be forging ahead with its sharemarket listing plans, with talk of a potential float raising as much as $120 million and valuing the company at $300 million to $400 million.
The Auckland-based company describes itself as New Zealand's largest credit surety and financial risk insurer.
Its business activities include providing cover against builders and other contractors failing to fulfil their obligations. The firm announced this month that it had appointed investment bank UBS and Bancorp Corporate Finance to "assess its options".
Translation: CBL is hoping to pull off an initial public offering (IPO) and dual listing on the NZX and Australia's ASX before the end of June.
Word on the street is that up to 90 per cent of a potential $120 million raising will be new capital, earmarked for fuelling international growth.
A market capitalisation of $400 million would imply a price-to-earnings multiple of roughly 11 times the $36 million operating profit CBL has reported for the year to December 31, 2014.
To compare, the NZX 50 - which has been on an extended rally for over six years - is trading at roughly 19 times earnings.
Stock Takes understands the CBL offer will be targeted more towards institutions than retail investors, although a broker firm offer is planned.
Fund managers might look kindly on CBL given the IPO is expected to be focused on raising new capital rather than providing an exit for existing shareholders.
In the end, success or failure will come down to the offer's pricing.
CBL was founded in 1973 and came under its current owners' control in 1996.
The company - which has reported total premium income of $242 million for the 2014 calendar year - is majority owned by managing director Peter Harris and deputy chairman Alistair Hutchison.
Harris and Hutchison are currently dealing with legal action from former business partner Anthony Thomas, who claims he was misled about CBL's value when he sold them his shares in the business in 2008.
IPO pipeline pump
Investment bankers are busily working on a number of potential IPOs behind the scenes.
In addition to CBL and freight and logistics operator Fliway Group, which expects to list on April 9, New Zealand retirement village firm Radius Care has also flagged the potential for a float.
In a blog post published last month, managing director Brien Cree said Radius Care, which operates more than 20 aged care facilities, was looking into the possibility of an IPO as part of its "future planning".
Oceania Healthcare, another aged care provider, said late last year that it was on track for an IPO in early 2015. But the Macquarie Group-managed firm's chief executive Earl Gasparich told BusinessDesk at that time that the company was also in talks with private investors and funds.
A market source said at least five New Zealand IPOs were being "prepped".
"They're not big."
NZX is gearing up to launch stock options following its introduction of NZX 20 index futures contracts last year.
The exchange operator announced yesterday that the option contracts, expected to go live on April 24, would initially be based on Fletcher Building, Spark and Trade Me shares.
The contracts give the buyer the right, but not the obligation to buy or sell a fixed number of shares at an agreed price in the future.
Traders basically bet on stocks either rising or falling.
Each contract will be for 100 shares and the NZX is planning to expand its options offering additional stocks.
NZX chief executive Tim Bennett said last month that the company would have liked to have seen a stronger uptake of the index futures contracts it launched last June.
Kathmandu shares took a pummelling on Tuesday following the release of a disappointing interim result.
But Morningstar analyst Farina Parsons reckons the market might be taking an overly dim view of the outdoor apparel and equipment seller's prospects.
Morningstar reduced its fair value estimate on Kathmandu shares from $2.50 to $1.90 after the retailer reported a half-year loss of $1.8 million - the result of a number of factors including lacklustre Christmas trading and high levels of discounting on excess inventory.
The stock closed down 13 per cent on Tuesday at $1.40, before regaining some ground on Wednesday.
It closed down 5c at $1.39 last night.
"Shares in Kathmandu are currently trading below our revised fair value estimate as the market appears to be extrapolating the current challenging trading conditions excessively into the future," Parsons said in a note.
However, she also warned that Morningstar believed there wasn't much standing between Kathmandu and competitors that want to encroach on its market.
"Despite brand ownership and exposure to a strongly growing category, we believe these attributes are easily replicable."
In terms of Kathmandu's full-year outlook much is hanging on the success of its Easter and winter sales. The retailer is expected to turn an annual profit of $25.4 million, down from $42.2 million in the previous year, according to analysts polled by Reuters.
Investment in Asia pays off
Morningstar has given a big thumbs up to Australia and New Zealand Banking Group.
The independent equity research provider entered ANZ into its "best stock ideas" list this week.
Shares in the Australasian lending giant, which is listed on both sides of the Tasman, have had a good run this year, rising about 14 per cent on the ASX. The stock closed at A$36.40 last night.
Morningstar said ANZ was the best-placed major Australian bank to capitalise on growing trade and investment flows between this part of the world and Asia, which was supplementing "more modest domestic growth".
In 2008, ANZ launched its strategy to become a "super regional" bank in the Asia Pacific region.
The bank clinched a deal in 2009 to buy the Asian businesses of Royal Bank of Scotland for US$550 million, giving it assets in Singapore, Hong Kong, Vietnam and Indonesia.
"The Asia-Pacific business is gaining momentum with good volume growth and is on track to hit its target of 25 per cent to 30 per cent of group earnings coming from Asia by 2017, from about 20 per cent currently," Morningstar said.
"The long-term potential for much-improved productivity and higher returns on equity stand out."
ASX-listed property firm Goodman Group was also entered into the best stock ideas list, while Woodside Petroleum and QBE Insurance were removed.