Soft market sinks new listings

By Peter V O'Brien

Friday 20th December 2002

It was a less than vintage year for new Stock Exchange listings, a matter the NZ Stock Exchange will probably be considering in its attempts to increase number and range of listed companies.

The seven new listings in 2002 covered a useful range of industries, although one, Straightedge, went into voluntary liquidation in October.

Newcomers have had a relatively unimpressive price performance since listing but that related to the dullness of general share trading rather than any intrinsic weakness.

Dunedin-based biotechnology company Botry-Zen listed on the main board in November, although it had been in operation with public shareholders since 2001. The shares sold at 14c yesterday, a solid gain in percentage terms. It was small in money terms. That would not worry people with sizeable parcels.

Botry-Zen differs from some now-discredited high-tech stocks in that its board comprises scientists and South Island big-time investor Howard Paterson, who is known for his ability to spot potential winners. The scientists are running the programmes forming the company's base.

Investors in such companies need patience. Refinement of research programmes and dissemination of the resulting products take time and eat money. Paybacks from successful operations can be massive.

There is a considerable difference between a company whose people are a combination of high-level scientific knowledge and financial acumen and those where individuals exploited fads to get a quick dollar, usually from share price movements.

Growing market caution about technology stocks was seen in market reaction to Straightedge's attempt to raise $5.5 million through the issue of 11 million shares at 50c each.

There was nothing blue-sky about Straightedge. The company was a spin-off from Carter Holt Harvey New Ventures, specialising in software applications for the construction and building industries. It was unable to have a successful public issue. Shareholders agreed to voluntary liquidation.

There will be no loss for those who subscribed because Carter Holt Harvey said it would ensure all shareholders received the original issue price of their shares.

CHH New Ventures chief executive Craig Knox said CHH would make up any difference between the amount realised on the liquidation of Straightedge and the original price of the shares

Other new listings were Allied Farmers (rural services), Paramount Property Trust (property investment), Skellmax (dairy rubberware, agriculture machinery and footwear), Turners Auctions (produce and vehicles) and Vertex (plastics and packaging).

Allied Farmers has operated in the rural services industry for many years and has a deserved reputation and solid acceptance in the farming industry, crucial for such a company as Wrightson realised after an ill-fated attempt to change direction.

Paramount Property Trust has yet to prove itself. The units were issued at $1 and sold yesterday at the same price.

Skellmax, like Allied Farmers, has a long history. Its radio advertisements jingle includes the lie "we have been around since 1910," referring to the Skellerup Industries arm of group operations. The annual meeting was told the public offer brought the company about 6800 shareholders, including several institutions.

Public offer shares were issued in June at $1.15 each. They sold yesterday at $1.03, another fallout from a recent weak local share market.

Turner's Auctions, a Guinness Peat Group partial spin-off, goes back more than 80 years as a company and longer as a partnership. It was split out of the Turners & Growers business in May. The shares sold at $2.60 yesterday, compared with the year's high of $2.65 and $2.16 low. Turners got control of Enza, which could have enhanced investor confidence.

Vertex is a different story. The company listed on July 1 after issuing 29.75 million shares at $2.15 each. On September 4 it said earnings before interest and tax were expected to be about 15% below the $5.2 million prospectus forecast. That had a major effect on the share price, which was $1.37 yesterday, a reasonable improvement on the year's low of $1.10.

Apart from Straightedge, the market had three delistings, two (Frucor Beverages and UnitedNetworks) from takeovers and the other fishing company Seafresh.

Next year could see more delistings. Investors would want new listings to be well ahead of those going off the list.

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