MyFoodBag is expected to be the first company to list on the NZX this year. Photo / file
Talk among market players is that this year has already got off to a busy start and new listings are on the way for the NZX.
Food delivery business MyFoodBag is in full swing, talking up its offering with fund managers.
Meanwhile, telecommunications company Vocus is said to be due to start its roadshow in mid-February for the float of its New Zealand arm.
But investors will need to be careful in judging the merits of each offer, and particularly wary of not being sucked in by the hype.
Looking back at last year's new listings, their performance has certainly been a mixed bag. On the NZX there were two initial public offers, two foreign exempt listings and one reverse takeover.
Health and wellness company MeToday was first cab off the rank, with a reverse takeover of CSM at the end of March. Its shares were trading at 11.5c when the deal happened but at Wednesday's close were at 7.4c.
Medicinal cannabis producer RuaBioscience was the first NZX initial public offer on October 22 - breaking a drought that had lasted since August 2019.
It had a 50c issue price and debuted at 70c but has since dropped back and is now trading around 52c (Wednesday closing price).
Kiwi online lender Harmoney was a dual listing on the ASX with New Zealand coming under the a foreign exempt listing - hitting the market on November 19 with an A$3.50 issue price.
But it debuted at a discount and has seen its shares tank further, prompting formal complaints to the regulators from investors and a call for a share price enquiry. It is currently trading around A$2.62.
Next was the NZ Rural Land Company, which had to delay its float by a few days. It had an issue price of $1.25 and debuted well but is now trading around $1.23.
Across the ditch on the ASX, New Zealand companies were jumping onto the market but investors have also had a mixed run.
Seven New Zealand companies listed on the ASX in 2020 and only two are currently trading above their offer price.
The most successful has been AroaBiosurgery. It listed on July 24 with an issue price of A75c a share and debuted strongly, rising to A$1.56. It is currently trading around A$1.03.
The other New Zealand company trading above its 2020 issue price is E-Road, whose shares are up by about 19 per cent.
Happy Valley Nutrition, which listed in January before Covid hit globally, is down by about 20 per cent while NZ Oil & Gas is down 18 per cent, Plexure down 7.5per cent and Laybuy down 7.1 per cent.
Mark Brown, chief investment officer at Devon Funds Management, said investors always had to exercise caution with whatever investments they made - and especially with new listings.
"The biggest question you have to ask yourself is why are people selling? And why are they putting themselves in the market?"
Brown said it was not an easy exercise being listed, although it was a great way for growing companies to access capital.
"That is the question people need to ask - do they need the capital or is this just an exit for somebody, because being listed on any exchange is probably the most stringent of all capital structures."
Brown said New Zealand hadn't had any sizeable new listings. "Even MyFoodBag doesn't appear to be enormous. Vocus as well would be reasonable, not massive.
"There is an enormous amount of private equity money sloshing around and in many respects that is providing an exit for certain companies or investors.
"So what lands up happening is you get smaller ones."
That means companies that have less appeal to institutional investors. "If they are in a sought-after sector they probably do continue to do well. But they are there for capital, it is understandable."
Brown said that beyond MyFoodBag and Vocus, he had not heard of other listings on the horizon but there was talk about more companies leaving the exchange.
Last year Metlifecare, Abano and Augusta all departed the NZX after acquisition activity.
More recently, Infratil has been in the sights of two potential bidders and its investment in power generator Tilt Renewables is in play. "That [Infratil] would be an enormous loss to the exchange that won't be made up by MyFoodBag or Vocus."
Brown said others such as Z Energy could also become takeover targets. Companies which had languished post-Covid could look interesting to investors looking for a private equity play or someone trying to consolidate a position in an industry, Brown added.
Fisher & Paykel Healthcare's market update has prompted analysts to upgrade earnings forecasts this week but it still has an underperform rating from brokers Forsyth Barr.
Forbarr analyst Chelsea Leadbetter noted that while F&P had provided a strong third quarter trading update, it had been difficult to accurately forecast the upside for the stock and would be equally difficult to understand the magnitude and timing of the demand slowdown likely to result as more people are vaccinated.
"We expect to see a decline in earnings as hospital hardware and IV consumables demand fades from elevated Covid-19 boosted levels, even when giving FPH the benefit of the doubt that growth in Optiflow consumables can continue from current levels.
"There remain a lot of unknowns and there is risk the market overcapitalises current
earnings. We see better risk/reward elsewhere in the NZ market and global healthcare sector."
Leadbetter increased her target price to $33 but that is still more than $2 below its current trading price.
She is forecasting a dividend of 48 cents per share in F&P's 2021 financial year, up from 27.5cps, then rising to 51cps in 2022 and 56cps in 2023.
That sounds a lot but on a cash dividend yield basis is only 1.4 per cent for 2021 and 1.5 per cent for 2022.
Jarden analysts Adrian Allbon and Luan Nguyen also upgraded their forecasts, increasing their target price from $33.55 to $36.10 and bumping up its full-year net profit forecast from $478m to $541m.
They retain a neutral rating on the stock.
"We maintain our neutral rating on valuation grounds which already captures a strong growth outlook and Covid-related benefits."
They say the key risks to the stock remain Covid demand, regulation changes and hospital competition.
Shares in gaming stock Gamestop, which owns EB Games in New Zealand and Australia, have had a volatile run of late on the New York Stock Exchange.
The company, which was already under pressure before Covid hit, with its stores struggling to compete with digital marketplaces, has been caught in a battle between retail investors and institutions.
Wired reports that Gamestop laid off dozens of regional managers in mid-2019 after a long-term decline in its share price and then the pandemic hit, prompting analysts to short sell the stock.
But in August last year, petfood site Chewy.com founder Ryan Cohen bought a large number of shares in the company and began pushing for it to build its e-commerce presence.
The shares rose on the news, putting short sellers in the bind of having to buy more stock to cover their borrowing.
Then retail investors got wind of the stock, especially those who use popular subreddit site WallStreetBets, and banding together, the members bought enough shares to move the price.
From a share price of US$19.95 on January 12, it has shot up to over US$120 a share with some very volatile intra-day prices.
BlackRock, the world's biggest fund manager, now has sizeable holdings in New Zealand's big hydro and wind power generators, Meridian (7.09 per cent) and Contact Energy (14.35 per cent), according to recent disclosures to the NZX.
The US firm has more than US$6.5 trillion in funds under management, and has recently taken a shine to investing in sustainable assets, hence its interest in the Kiwi power generators.
The legendary Larry Fink, BlackRock's chairman and chief executive, has been back on his climate change soapbox, having already said last year that "climate risk is investment risk".
He said then that as markets started to price climate risk into the value of securities, it would spark a fundamental reallocation of capital.
This week, in an update to investors, Fink said: "Then the pandemic took hold – and in March, the conventional wisdom was the crisis would divert attention from climate. But just the opposite took place, and the reallocation of capital accelerated even faster than I anticipated."
From January through November 2020, investors in mutual funds and exchange traded funds invested US$288 billion globally in sustainable assets, a 96 per cent increase over the whole of 2019.
"I believe that this is the beginning of a long but rapidly accelerating transition – one that will unfold over many years and reshape asset prices of every type," Fink said.
"We know that climate risk is investment risk. But we also believe the climate transition presents a historic investment opportunity."
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