Tue, Dec 10, 2013 - Page 15 News List

No let up in Australian IPO rebound

Reuters, HONG KONG and SYDNEY

Bankers in Australia have much to cheer this Christmas as fees from underwriting IPOs surge 10-fold this year, and many are now betting on an equally active year next year as a slew of private equity exits keep the market busy.

This year, companies are expected to have raised about US$6 billion through initial public offerings, a six-fold jump from last year and the highest since 2010, according to Thomson Reuters data.

Yesterday, shares in education training provider Vocation Ltd opened up 10 percent on their A$1.89 offer price after the company raised A$253 million (US$230.19 million) in its IPO. Vocation last traded at A$2.06, giving the company a market capitalization of A$412 million.

The firm’s upbeat open comes after a strong performance from peers Navitas Ltd and G8 Education Ltd, IG’s market strategist Evan Lucas said. Navitas’ shares are up 27 percent so far this year, while G8’s have risen 89 percent.

“It’s in the right area, it’s in the right industry, it’s certainly getting the attention that it requires, and that’s why you’ll probably see Vocation doing quite well today as well,” Lucas said.

The rush of listings, most of which are concentrated in the last two months of the year, have led some bankers to predict an IPO pipeline of at least US$5.46 billion next year, defying a slowing domestic economy weakened by falling commodity prices.

The resurgence follows two lean years in 2011 and last year when investor appetite for new issues slumped due to global economic uncertainty and a rash of poor secondary market performances.

“In Australia, we’ve been through a series of interest rate cuts ... and that combination of historically low rates plus confidence around the global growth picture, as well as lower volatility, has attracted a lot of investors back into equities,” said Hugh Falcon, co-head of equity capital markets for Australia and New Zealand at Macquarie Group Ltd.

The Australian IPO market has been the third-busiest in the Asia-Pacific region — behind Hong Kong and Singapore — rising from the 10th place last year, Thomson Reuters data shows.

The estimated fees from underwriting IPOs in Australia has jumped to US$110 million this year, according to Thomson Reuters-Freeman Consulting, with home-grown Macquarie dominating the league table followed by Swiss bank UBS AG.

For investors, buying into new listings has been more profitable than betting on already listed companies, further buoying issuers.

Companies such as OzForex Group, Veda Group and Steadfast Group have risen more than 40 percent from their offer prices. That compares with a 11.6 percent gain in the benchmark index this year.

Packaging company Pact Group is due to list on Tuesday next week after raising A$649 million in Australia’s biggest IPO. The second-largest was Nine Entertainment Co Holdings Ltd, which made its market debut on Friday last week.

Travel insurer Cover-More Group, seeking to raise A$521 million, plans to start trading two days after Pact.

Among the companies expected to list next year include government-owned insurer Medibank Private and healthcare business The Healthscope Group, owned by private equity funds The Carlyle Group and TPG Capital Management, according to a banking source.

Facilities management outfit Spotless Group, owned by Australian private equity fund Pacific Equity Partners, is also expected to launch an IPO, the source said, adding those offers could potentially raise more than A$1 billion each.

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