Record number of new listings on bouyant stock exchange in 2004

By Kate Perry of NZPA

Friday 31st December 2004

The past year saw a record number of new listings on the sharemarket.

Many of the floats went swimmingly with investors able to realise quick gains.

But some of the new listings among the flurry of companies scrambling to go public failed to live up to expectations.

According to data from stock exchange operator NZX, the number of floats jumped from just seven in 2003 to 20 in 2004.

Funds raised through initial public offerings (IPO) totalled $774 million, up a massive $608 million on the $166 million raised the year before.

But the wheels almost came off the flurry of IPOs when the year's largest offering, Feltex, failed to live up to expectations.

Feltex raised $243 million in its IPO and was the market's biggest float since Contact Energy listed five years ago.

But the carpet maker's reappearance on the stock exchange after a gap of nearly 20 years has not been all rosy.

The shares have traded at a discount to their $1.70 issue price since listing. The stock hit a low of $1.51 in late October, before creeping up to end the year at $1.64.

First NZ Capital research manager Barry Lindsay said while Feltex's foray onto the sharemarket had not been a resounding success he believed the stock could make up lost ground.

First NZ Capital, which was lead manager for the Feltex float, has a target price of $2.00 on the stock within the next 12 months.

"There was an initial disappointment for the initial subscribers of the stock, but we believe by hanging in there they will see their investment provide rewards over the next 12 months or so," Lindsay said.

He said the expectation of a rising share price was dependent to a certain extent on the New Zealand dollar falling against the Australian dollar, as over half of Feltex's sales were generated across the Tasman.

Feltex's disappointing debut briefly spooked the market, with talk of "IPO fatigue" circulating.

A week after Feltex's listing, investment company Colville Equities pulled the plug on its planned IPO.

Colville said it scrapped a planned $50 million IPO because of the "depressed" state of the new issues market.

"According to brokers, investors who had initially said they would invest in Colville have withdrawn their support because of the poor performance of recent IPOs (initial public offerings)," the company said at the time in a statement.

But not all new offerings struggled. A more successful, and much smaller, new listing was children's clothing retailer Pumpkin Patch, which listed on June 9, just days after Feltex.

Unlike Feltex, Pumpkin Patch's shares started trading at a premium from day one and have not looked back. The shares ended the year at $2.78, just six months after making its market debut at an issue price of $1.25.

"You would have to say in contrast to Feltex it has been an absolute winner," Lindsay said.

"It has really just gone from strength to strength and surpassed the expectations contained in its prospectus."

Another proposed float that sunk in 2004 was Storefund.

Storefund was set to list on July 1, but failed to attract enough investors.

Storefund had an agreement to buy retail chain the BBQ Factory for $2.1 million.

The failure of the IPO meant ASB gained an 80% stake in BBQ Factory by default after underwriting the share offer.

ASB said at the time it did not plan to offer any cross promotions, such as free grills with savings accounts.

ASB underwrote the offer to 20 million shares - worth $1 each - while the target was to raise $30 million.

The sharemarket's depleted media sector got a boost with the listing of CanWest MediaWorks in July.

The only other listed media stock of note in New Zealand is pay television operator Sky Network Television, majority owned by Independent Newspapers.

CanWest MediaWorks owns TV3 as well as six national radio brands.

CanWest's Canadian parent raised $104 million by floating off 30% of the company at $1.53 a share. The shares ended the year up at $2.16.

Another successful new offering came late in the year, with the listing of tap and showerware manufacturer Methven.

Methven listed in November at $1.64, up from an issue price of $1.43. The stock remained firm for the rest of the year, to finish 2004 at $1.67.

Not all of the new listings made it to the main NZSX board. The alternative market, the NZAX, also saw a number of new entrants this year.

The most spectacular new listing on the NZAX was Just Water International, which listed in June at a 32% premium to the 50c issue price.

Just Water's IPO of 25% of the company, which raised $8.25 million, was the first IPO on the NZAX market. Stock exchange operator New Zealand Exchange (NZX) got in on the listing action itself, listing on the main board in July.

Shares in NZX have jumped from the issue price of $3.60 to end the year at $9.20.

"It's...I guess reflective of the good performance of our stock market this year," Lindsay said.

The stock market had a bumper year, with the NZSX-50 gross index finishing the year at a record high of 3064.44, up from 1880.9 when it became the country's benchmark index on 3 March, 2003.

Trading activity across the market also jumped, with the value of shares traded for the 11 months ended November up 25% on the year earlier, at $25.6 billion.

The number of trades increased from 539,240 for the same period last year to 573,398, an increase of just over 6%.

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