2014 was a record year for IPOs on the NZX with 12 new listings raising NZ$2bn. This edged out the 10 IPOs in 2013, which was a 10 year high.

However, 2015 has started at a more sedate pace. To date there has been only one IPO, the national freight and courier company Fliway, which raised the relatively small sum of NZ$35m. By this time last year two IPOs had already been completed (raising NZ$970m) and at least three others were well advanced – albeit one of these, Hirepool, was ultimately unsuccessful in making it to the sharemarket.

It is still early in the year and things could accelerate in the second half – as they did in the second half of 2014. But the reduction in activity this year to date also reflects a more cautious and selective approach from investors as the higher returns expected from investing in higher risk new issues have largely failed to materialise.

NZX IPOs off to a slow start in 2015

Share Performance as at 20 May 2015. Source: IRESS

In fact, looking at the 13 NZX IPOs since January 2014:

  • More than half (7) are trading below their initial issue prices.
  • 4 of those 7 have fallen by double digit percentages, and
  • On average the 13 stocks have outperformed the market by just 2%.

On the other hand, the table also highlights three very successful IPOs. Genesis, Eroad and Vista have all risen by more than 10%.

Of these the stand out is cinema software company Vista. Its share price has doubled since listing in August, helped by repeatedly beating its initial growth forecasts. That’s part of the reason the company was recognised last week as the Equity Issue of the Year by INFINZ, NZ’s Institute of Financial Professionals. Tellingly, excluding Vista the remaining 12 IPOs underperformed the market by 6% on average since listing.

To be fair, such analysis particularly underplays the performance of another success story; Genesis. A significant driver of its 22% share price rise has been the company’s generous dividend policy. Since listing the company has returned 20c per share in dividends. Its total shareholder return of 35% compares to an increase in the NZX All total return index of 14%.

So, how is the rest of 2015 shaping up for NZX IPOs? Well the signs are encouraging. The NZ media has highlighted a number of potential new listings, including Carter Holt Harvey. In Australia, often a timelier indicator of changes in market trends, IPO activity has sprung back to life with a vengeance in the last few weeks.

We will wait and see whether this year can challenge the heights of 2014. But so far the balance of power in negotiations appears to have swung more to investors. Deals this year will likely have to be structured and priced more attractively by vendors.

 

David Rigby

Senior Analyst

Disclosure of interests: Milford Asset Management currently holds shares in all companies listed above except Intueri, ikeGPS, Fliway and Eroad on behalf of clients.

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