NZ investors anxious for new listings

A number OF New Zealand companies including EziBuy, the Open Country Cheese and Vehicle Testing New Zealand are contemplating public flotations in the next 18 months as cash swirls around the market.

"One of the consequences of the collapses we have seen in the unlisted finance sector will be more investors looking for listed products," said NZX markets development manager Geoff Brown last week.

Australian interest in the listed and unlisted markets was making the domestic private equity and venture capital sector much more vibrant and competitive, Brown said.

Getting agribusiness companies on the boards was a priority, as was finding ways to bring more state-owned enterprises to the market, he added.

Sharebroker Andrew McDouall of McDouall Stuart Group said he was talking to at least 10 companies considering listing for growth or shareholder exit reasons.

Direct mail fashion and homeware retailer EziBuy is also tipped to float at some stage but it was staying schtumm on this last week. Its backers, who include private equity investor Direct Capital, refused to comment. Some fund managers believe the economic climate could be wrong.

Waikato's Open Country Cheese has its shares on the Unlisted register, but chief executive Alan Walters said a NZX listing shouldn't be ruled out.

Some companies will continue to take the trade sale route. Hirepool managing director, Tenby Powell has intimated an announcement about a trade sale is due in the next few weeks.

If the sale falls through, the company will consider a float, potentially worth $200 million. Powell, a 24.5 per cent owner with wife Sharon Hunter, said an IPO could be two to three years away. The hire equipment chain is 51 per cent owned by Goldman Sachs JBWere's Hauraki Private Equity No 1 Fund. Mainfreight is also a shareholder.

Other companies who have announced their decision to float in the next few months include Australia's Transpacific Industries. It expects to list on the NZX this month or in August, after buying Waste Management for $870m. The company wants to raise A$400m (NZ$482.5m).

Pike River Coal, 69 per cent owned by New Zealand Oil and Gas, has said it has planned a public share offer, which according to market sources could happen as early next month. It hopes to achieve a market value of $160m. Pike River wants to raise between $40m and $60m to help fund the development of a mine on the West Coast of the South Island.

New Zealand Pharmaceuticals, meanwhile, which makes speciality chemicals for the world's big pharmaceutical and biotechnology companies, will list on the main board next year or in 2008, said chairman Graeme Milne last week. NZP is 51 per cent owned by Direct Capital.

Meanwhile some of New Zealand's fastest-growing operations stick resolutely to their private status. One of the nation's most successful companies, Fulton Hogan, the diversified construction group is unlikely to look for an exit route any time soon. A company source said the owners didn't want to list the fast growing firm currently pursuing an aggressive expansion path.

Its shareholders are divided into just over 40 per cent Fulton and Hogan family interests; 38 per cent Shell Oil; and the balance held by staff and former staff. The company based in Christchurch has 3400 staff and offices in 28 locations in Australasia.

Some companies just don't want the attention. "They're suddenly going into the public arena where people want to see their profits maximised. Companies are often very secretive about their earnings," McDouall said.

Carmel Fisher, whose company Fisher Funds, has 15 long-held investments, and likes to freshen-up with one or two new stocks a year if it can, believes the requirement for disclosure can frighten prospects off.

"Suddenly you are out there for everyone to see, warts and all. Everything about you has to be disclosed. A private company doesn't have to run things past thousands of shareholders to get their approval, and not many owners of private companies want their business scrutinised by analysts and criticised for what they do."

There will always be some surprises. The $45m float of wine company Delegats in April was unexpected, said Fisher. The hugely successful float of Rakon, was everything she'd hoped for.

Like many investors, Fisher Funds has an appetite for new floats. But what presses one fund manager's buttons might not work for others.

Fisher is hungry for companies with strong growth potential, so speculation that utility Vehicle Testing New Zealand is considering a float soon doesn't excite her.

But Tyndall Investment Management's fund manager, Rickey Ward, said its promise of solid cash flows and good yields would be attractiveto investors.

Fisher is concerned new blood on the NZX or the alternative exchange are relatively small companies, compared to the large stocks that have been lost in recent years.

"It is doubtful we'll see a repeat of the strong performances of 2004 and 2005 when capital raisings, including IPOs for equity and debt and the secondary markets, raised around $4bn. Seventeen companies raised capital or were IPOs in 2004, compared to five last year."

NZX's Brown said in the year to date $1.7bn had been raised. Primary industries continue to be conspicuous by their absence.

"One of the measures of markets and how you rate an exchange is to look at the capital of the exchange relative to GDP," Brown said.

The market capital of the main NZX board is $70bn - GDP is around $140bn. Australia's capital market is around 1.3 times the size of GDP. A whopping A$13.2bn (NZ$16.3bn)was raised by the 170 companies that went public in 2005-6. Singapore's market is twice the size of its GDP.

"So what that tells you is that a lot of the New Zealand economy is not reflected in what is listed, and that continues to be the challenge for us." said Brown.

Debt market IPOs in the past three years have swelled that market from under $5bn to more than $8bn.

Rob Mercer, head of research at Forsyth Barr, believes a number of new equity and debt listings are on the cards. "People are looking for new investment ideas. It's a healthy balance for both vendor and businesses coming to market. The multiples are fair - for every dollar of earnings you are probably getting a 10-15 per cent premium on price than you would have got it you had brought the same story to market four to five years ago," said Mercer. "Its healthy."