Thursday 24th January 2019
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The year ahead is shaping up to be more positive for potential new listings including initial public offerings, NZX chief executive Mark Peterson says.
“2019 certainly looks better from where we sit than it has for a little while,” Peterson told BusinessDesk.
“It’s one of those things where you never can tell until the listing occurs but we’re having more positive discussion than we’ve seen for a wee while.”
New listings on NZX in 2018 numbered just two, neither of them IPOs – QEX Logistics’ compliance listing and PaySauce’s backdoor listing through the shell of Energy Mad.
And 2017 wasn’t much better with Oceania Healthcare’s $200 million float in May that year and TIL Logistics Group’s backdoor listing in December.
NZX’s number of listed equities has been bleeding for years – it was down to 138 at Dec.31 from 159 a year earlier and 173 in December 2015.
“Let’s not get downbeat about all of those things. There’s a lot to be positive about here,” Peterson says.
He says he can’t name names, but there are a couple of potential listings waiting in the wings, including AMP’s New Zealand-based wealth management and advice business and Napier Port – submissions from ratepayers backed a partial sell-down and seven of nine Hawke's Bay regional councillors voted late last year to start the process of selling 49 percent.
Salus Aviation, an aircraft leasing and maintenance business backed by Bancorp Treasury Services, has also been talked about as a potential float.
NZX and the Financial Markets Authority have just announced a review, Capital Markets 2029, of the broader capital markets ecosystem in an effort to turn such statistics around. Former FNZC managing director Martin Stearne has been appointed to lead the review with assistance from accounting firm EY.
Peterson says since he was confirmed as chief executive 18 months ago, the exchange has been working on “a whole lot of foundational stuff we can control”. It's now time to get all participants in financial markets together to set a strategy for the next 10 years.
Some of those measures already undertaken include pushing more trading activity onto the market, restructuring NZX by folding its AX and NXT junior markets into the main and now single board, and encouraging managed funds to list.
Peterson rejects the suggestion that the merchant banking fraternity – it is mostly men - is less willing to take risks these days.
“You’ve got a few things going on here – different types of businesses with different business models, some make money, some don’t and people have different views on things” and different businesses are at different stages of development, he said.
The size of the business may play a part “but we’ve seen in the past some small businesses listing,” Peterson said, citing QEX Logistics – with a market capitalisation of $63 million.
When TIL Logistics listed, then chairman Jim Ramsay said he would have preferred an IPO but the company’s advisors told the board there wasn’t sufficient support for a float.
The owners of TIL, whose market capitalisation is currently $119.2 million, saw the NZX listing as part of its succession plan, Ramsay said.
In October, the owners of more than 88 percent of the company sold 12 million shares, or 14.5 percent, in line with their commitment at the time of the backdoor listing as a way of improving liquidity.
TIL is maybe a little bigger than Mainfreight when it listed in 1996 after raising nearly $57 million at 96 cents per share. Its shares are now trading at more than $32.
NZX certainly received a boost from the listing of the three government-owned electricity companies in 2013 and 2014.
But apart from those, high-profile floats that have been promoted to retail investors through newspaper advertising have been few and far between in recent times.
Z Energy’s float in 2011 was one, accompanied by the company’s rebranding exercise, and then there was that of Restaurant Brands in 1997 which was heavily promoted on the strength of its KFC and Pizza Hut brands.
“When there is a very well-known brand, then some of that marketing activity has already been done,” Peterson says.
He says many of those companies that are listed on NZX have been performing very well – the benchmark S&P/NZX 50 Index has gained almost 10 percent in the past 12 months.
“Generally, their prices are well-supported by operating earnings,” he says.
“The question for the industry is when we look at some of these opportunities that do come up, how are we going to facilitate the growth of the market,” Peterson says.
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