IPO review

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IPOs remain ahead of the market in a more stable Q3 as healthy pipeline combats uncertain global market

21 October 2016: Despite continuing uncertainty in global markets surrounding the impact of Brexit and the US presidential election result, IPO performance to September 2016 re-bounded in Australia, following the federal election, a reporting season rally and a record low interest rate environment.

Against this backdrop, and according to Deloitte Corporate Finance’s ASX IPO Q3 2016 analysis:

  • The period saw 25 listings (30 in Q3 2015), with combined market capitalisation of $3,974m, compared to $4,433m for Q3 2015
  • IPO volume remained strong, albeit at a marginally lower average capital raising ($94m average in Q3 2016 to $101m in Q3 2015)
  • New listings achieved average gains of 5.2%, while all 2016 listings saw gains of 20.6%, compared to average gains of 11.4% to Q3 2015
  • 11 listings exceeded a market capitalisation of $75m, the largest being VIVA Energy REIT (+9.1%) ($1,518), Propertylink Group ($537m) and Scottish Pacific ($445m)
  • Of the $75m+ market capitalisation listings, the best performers were Scottish Pacific (18.8%) and Range International (36%)
  • Three of the nine stocks with negative performance since listing had a market cap of over $75m –
    Australis Oil & Gas Ltd (-12%), Kogan.com (-15.6%) Propertylink Group (-18.5%)
  • The poorest performer since listing was Fintech group CoAssets Ltd (-42.5%).

ASX public listings 2014 - 2016

Deloitte National Leader Corporate Finance Ian Turner said: “While local and global events created a volatile environment, and there’s no obvious sign of change on this front with the, for example, the US presidential election still to come, Australian IPOs remain resilient and quality assets are still in firmly in favour, as forecast in our most recent IPO report).

“While foreign listings decreased in number, there were still six foreign businesses, or businesses with operations primarily overseas, that listed on the ASX. The largest was Malaysia-based Frontier Digital Ventures, which saw gains of 5%.

“Interestingly all other listings posted losses of over 10% since listing, indicating that although Australia is an attractive market for businesses, investors are treating foreign operations with more scepticism.”

In addition to the above, the New Zealand listed Michael Hill International Limited also listed on the ASX during this period.

2016 listings - top and bottom 5 performers

2014 and 2015 listings

Average 2015 listing performance to 30 September 2016 was 18.8%, up from 12% at 30 June 2016 and finishing above the performance to 31 December 2015 of 18.2%. Top performers continued to be Appen (556% gains) and Class Ltd (299% gains). 2014 listings saw average return growth to 30 June 2016 depress slightly to 34.7% from 38.9% at 30 June 2016.

Deloitte Corporate Finance lead IPO director Tapan Verma said: “Full-year results were reported through August and, in the continuing low interest rate environment, we saw investors paying close attention to the ability of companies to meet earnings forecasts, as the search for yield and return continues.”

Of the positive performers in 2016, the two largest listings of the year so far, Reliance Worldwide and Wisetech Global both exceeded prospectus forecast NPAT earnings by 2% and 1.2% respectively, and experienced a similar share price jump on the result with both up 24% and 70.1% respectively since listing.

Of the 2015 listings, BWX exceeded prospectus NPAT by 8% and saw gains since listing increase to 226% and Baby Bunting Group exceeded expectations by 16% and has been rewarded with gains of 118% since listing.

“There is also clear evidence that companies that don’t meet expectations set out in their prospectus will be scrutinised,” Verma said.

Temple and Webster, for example, downgraded forecasts and revenue was 20% down on the original prospectus expectations. Subsequently, total losses since listing were 86.4%.

IPO pipeline

Turner said: “Q4 2016 is expected to be a bumper quarter for IPOs, as companies dash for a pre-new year finish line. This doesn’t mean we’re out of the water in terms of prospective volatility, but in a record low interest rate environment, investors are looking to the market.”

IPOs expected in the final quarter include a number of highly anticipated, multi-billion dollar assets, including Alinta Energy, Inghams and Charter Hall’s WALE REIT. Also expected is car dealership Autosports Group, which will look to the continuing success of Motorcycle Holdings, which listed earlier in the year and is up 65%.

For more on Deloitte's IPO reviews, please visit the report page.

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