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Three new floats brighten an otherwise dull sharemarket

Friday 18th August 2000

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PETER V O'BRIEN finds a mixed year for new Stock Exchange listings

It has been a mixed year for new stock exchange listings after the introduction of the Stock Exchange's New Capital Market facility.

The fortunes of seven new listings are in the table. Percentage changes from the issue prices until last Friday ranged from -71.6% (Beauty Direct) to +230% (GDC Communications).

There was also a considerable range in terms of company size. e-Ventures had 250 million shares on issue and a market capitalisation of $132.5 million last Friday and Frucor Beverages Group accounted for 124.89 million shares and a market capitalisation of $280.9 million.

NZIJ listed with only 1.2 million shares. Market capitalisation on Friday was a tiny $600,000.

The company brought together the broking and merchant banking activities of Wellington business Reuhman and Co.

Mowbray Collectables was not much smaller, with 2.3 million shares on issue and a market capitalisation of $1.6 million at 70c a share.

The number of shares on issue does not tell the full story about how many are available for trading. All companies in the table have either one dominant shareholder, or a few people/companies with effective control.

National Mail New Zealand founder Paul Meier, for example, had 44.93% of his company's capital after the public offer of 11.2 million shares. The mail service operator had 27.44 million shares on issue, but the number effectively available for trading has about half that, because another substantial shareholder had 7.93% after the offer.

Company sizes in terms of market capitalisation obviously vary according to fluctuations in the share price. Beauty Direct, the online cosmetics retailer, had 28 million shares on issue last week and a capitalisation of $1.9 million at a price of 7.1c.

The capitalisation would have been $8.96 million if the stock had maintained the 32c at which it peaked on listing day.

Other new listings are understood to be "in the works," with others deferred in June when worldwide markets tumbled, particularly in the technology sectors.

It would take a big effort for the 200 listings to have a bigger impact on the market than the group of companies that listed last year.

In alphabetical order, they were Calan Healthcare, Colonial First State Property Trust, Contact Energy, Ryman Healthcare, Southern Capital (effectively a backdoor listing) and insurance and financial services group Tower.

Those companies last week had capitalisations of, respectively, $140.86 million, $137.75 million, $1.51 billion, $179 million, $61.68 million and $778.9 million.

Those capitalisations need adjustment to reflect non-dominant shareholder participation in a float but they would still outweigh this year's crop many times.

Some of the 2000 floats suffered from unfortunate timing, although the promoters were not to know until later that the timing could have been better.

Beauty Direct, for example, listed on March 29, 12 trading days before the US Nasdaq index fell 9.67% in one day. The New Zealand online retailer's price fell from 32c immediately after listing to 15c and has since retreated further.

National Mail was also caught in the technology stock slump in April. The company operates physical mail delivery services but has interests in e-business. The company's share price has moved around the 85c it fell to in mid-April, going lower to 75c, and recovering again.

GDC Communications was the hotshot of this year's listings. The telecommunications infrastructure group has been the best performer of all companies on the sharemarket this year. It has been listed for only three months.

GDC's prospectus projected net profit of $4.07 million for the year ended December 2000, which would be 10.75c a share for the current 37.86 million shares on issue.

The prospective price/earnings multiple at last week's price of $4.95 would be a massive 47.2, which is up there with some of the fancy p/es applied to US technology stocks, but with a difference; GDC has sales revenue and earns profit.

Net profit for the six months ended June was $1.34 million, an increase of 27.8% over the $1.05 million earned in the corresponding period of the previous year.

The interim report said the directors were confident the company would exceed the prospectus profit forecast.

The market must be expecting excellent performances in future years given the share price but a company is not responsible for investors' market activity.

At least three of the new floats have brightened an otherwise dull sharemarket.

New listings statistics

CompanyIssue price (c)Peak on listing dayYear highYear lowAug 10% change: issue price to 10/8
Beauty2532327.17.1-71.6
e-Ventures5069725052+4.0
Frucor150157247145225+50.0
GDC Comms150215511175495+230.0
Mowbray5055845070+40.0
National Mail1251401387585-32.0
NZIJ5052524550Nil


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