Stock Takes: Battle of the exchanges heats up

Vodafone chief executive Jason Paris is lining up an IPO for 2020. Photo / File

In a blow to the NZX, the Australian Securities Exchange is to open a New Zealand office in Auckland for the first time.

The ASX has long been crossing the ditch to encourage New Zealand companies to float or dual list in Australia. But now the Aussie rival is to take it a step further by hiring a someone on the ground with plans to open a downtown office by March.

Max Cunningham, ASX executive general manager of listings and issuer services, said it began actively marketing to New Zealand companies about five years ago using Australia's big pool of superannuation savings as a lure.

Two years ago it granted companies already NZX-listed a foreign exemption making it easier for them to dual list on the ASX. That has seen numbers of dual-listed NZ companies rise from the mid-teens to 58 with Heartland Bank the latest to make the move earlier this month.

Cunningham says it plans to approach other companies which are yet to dual list as well as tapping into the venture capital market to encourage further initial public offers.

"We've had strong engagement and interest from listed companies, brokers and investment banks and fund managers. We think now is the time to open an office in New Zealand."

He played down the competition aspect, saying the ASX competed with a lot of global exchanges and had a good relationship with the NZX.

"In the compliance area we work closely. Ultimately when you look at companies that do dual list, they have seen their New Zealand liquidity increase as well."

He laughed off questions about whether the ASX would acquire its smaller rival in the future. "That is well above my pay grade," he joked. Stock Takes is not so sure the NZX will take the move so lightly.

Hold on caller

One company that is bound to be eyed up by both exchanges is the local arm of Vodafone.

New chief executive Jason Paris confirmed last week that it is lining up the telco for an initial public offer — but not until 2020.

That will give Paris time to get the company into shape, and position it as a dividend paying stock.

Vodafone was shopped around fund managers last year in a non-deal roadshow receiving a mixed response.

Harbour Asset Management portfolio manager Shane Solly said it was a tough market to be listing in.

"Investors are very cautious at the moment given tightening debt liquidity globally," he said.

"If Vodafone comes to market, governance structures will need to be at best practice levels and pricing will need to reflect potentially low growth prospects."

Castle Point's Stephen Bennie said it would have to pump out a solid dividend to draw investor interest.

"Spark has shown that this is very much the model for these types of businesses."

Jumping ship

Next year's IPO hopeful — a spin-off of AMP New Zealand — could be facing its own challenges.

One broker told Stock Takes that advisers were leaving the New Zealand business in the wake of reputational damage caused by Australia's Royal Commission findings on its Australian parent and over future uncertainty.

That could make valuing the business a challenge as advisers tend to take their clients and their money with them.

But AMP New Zealand spokesman said: "We have experienced no material loss of advisers in New Zealand and continue to maintain one of the most diverse and extensive distribution networks supporting advisers across the country."

The spokesman said preparation for the IPO was continuing apace.

Raising eyebrows

Eyebrows have been raised around a performance fee paid to Infratil manager Morrison & Co revealed this week as part of its half-year accounts.

Under corporate costs and "other" costs, Infratil revealed a $29.4 million accrual for performance fees payable to the manager under the international portfolio mandate.

It noted that the fee had been accrued in relation to the group's investments in ANU Student Accommodation, Canberra Data Centres, Longroad Energy and Tilt Renewables which Infratil is in the midst of making a takeover bid for.

The fee is based on 20 per cent of the collective net after-tax returns to Infratil above 12 per annum in the period from acquisition until March 31 2019.

Tilt's IPO price was $2.25 and it has only gone up in value because of Infratil's takeover offer which is priced at $2.30.

But some back of the envelope calculations point to the fee being based on the $2.79 valuation in the Tilt independent valuation report — a report that was only initiated because of the Infratil bid and was rubbished by Infratil.

While the fee is small change in terms of share price impact, it had raised eyebrows over whether Infratil's manager's interests are aligned with Infratil's shareholders.

Infratil shares have risen 8 per cent over the last year and closed yesterday on $3.51.

Big Legacy

Monday was kiwi financial expert Paul Costello's funeral in Melbourne.

He was the inaugural chief of super funds on both sides of the Tasman which now stand at around $200b. The legacy he leaves is huge.

He ran the NZ Super Fund which now stands at around $40b and Australia's Future Fund which by September was just over A$148b.

Financial experts here and in Australia were this week and last paying tributes to him. His memorial service and wake was at the Rosina auditorium at the Abbotsford Convent in Melbourne on Monday.

The Super Fund's general manager of finance and risk, Stewart Brooks, worked closely with Paul Costello in setting up the Crown-backed pension fund.

"Paul was an excellent chief executive who established the foundations of our organisation," Brooks said.

"He was an early visionary in responsible investment and his focus on this, and on quality and integrity, has endured at the Guardians.

"Paul was blessed with a strong intellect, and was considered and professional in everything he did – a true gentleman.

"The Guardians would not be the organisation it is today without Paul's many and varied contributions to it, and it was a privilege to work with him."

Brian Gaynor, who was on the guardian's board when Costello was appointed said: "Paul was top class, extraordinarily good. I can't say how professional he was because we were just starting. It's often very difficult when you start up an organisation to run it but he was so good."