CBL shares climb 12% on NZX debut

Tuesday 13th October 2015

CBL Corp shares rose 12 percent on their NZX debut after the credit surety and financial risk insurer raised $90 million of new capital in an initial public offering which saw the stock originally priced lower amid market volatility.

The shares first traded at $1.74 giving the company an implied market capitalisation of $382.3 million and up from the $1.55 offer price, the lower end of the firm's share pricing range. The shares recently traded at $1.75.

The offer came during a period marked by volatile markets as investors weighed the outlook for the US Federal Reserve to hike rates for the first time in a decade, while nervousness about China's growth outlook spooked traders from equities as an asset class. Locally the S&P/NZX 50 Index declined some 3.5 percent in the September quarter as offshore jitters weighed on local sentiment.

"The pricing was done when macro events were certainly seeing the market get whacked, so the pricing in the book build and IPO process was done when the market was taking a relative walloping," said James Smalley, director at Hamilton Hindin Greene. That meant the managers of the offer priced the stock more conservatively than they otherwise might have.

"Subsequent to them setting that price we've seen a bounce back in equity markets. Because of improved sentiment in markets that's why we're seeing the price up," Smalley said. "It just shows you how quickly sentiment can change on the stock market."

The Auckland based firm raised $125 million in total from the sale, of which $35 million will go to existing shareholders selling into the offer. Of the remaining $90 million, $32.7 million will pay for the acquisition of Australian insurer Assetinsure, up to $20 million will increase regulatory capital, and $28.9 million will be put aside to provide headroom for organic growth or other potential purchases. About $8.4 million will be spent on offer costs.

The stock opted for a dual-listing, with trading on the ASX to begin at 2pm NZT.

Smalley, who is a broker for a retail investors, said Hamilton Hindin Greene didn't go in on the offer. The insurance sector is a complicated offer and there hadn't been much publicity around the offer, he said.

"It's not as black and white to get your head around - there is quite a lot of industry-based risks," Smalley said.

CBL, which began as Contractors Bonding Ltd in 1973, derives almost 98 percent of its revenue from international operations. The company said it expects its dual listing on the NZX and ASX to increase its profile, broaden its investor base, increase regulatory capital capacity, and help fund growth.

The company's 2014 net profit rose 8 percent to $19.4 million on gross written premiums of $242 million. It is forecasting gross written premiums of $335 million this year.

BusinessDesk.co.nz

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