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IPO numbers increase but market fails to live up to expectations in FY11


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Wednesday, 6 July 2011: New data released today from the Deloitte Corporate Finance IPO survey shows the financial year ending 30 June 2011 (FY11) produced 123 floats, almost double the number in the previous financial year.

Likewise, the value of funds raised from investors climbed strongly, up from $4 billion in FY10 to $7.6 billion in FY11. However, Deloitte Corporate Finance partner, Steve Woosnam, noted these strong numbers disguised a challenging second half of the year for IPO activity.

"The value of funds raised reflected two big floats in the December 10 quarter, namely QR National and Westfield Trust, which together raised almost $6.1 billion, while the number of floats was again boosted by activity in the resource sector, which produced 95 IPOs, almost 80% of all floats for the year.

"The successful listing of Queensland Rail in particular raised expectations for the IPO market in the new year, however, overall the market has failed to live up to these expectations, with many businesses foregoing a listing, often in favour of a trade sale. The equity market simply couldn't match the valuation expectations of vendors or those achieved through private sales."

 
  2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
$billion raised

1.981

4.269

10.788

10.174

13.247

10.550

5.884

1.149

4.011

7.555

Number of IPOs

60

55

151

174

169

221

201

28

63

123

 

Mr Woosnam said the current state of the IPO market was better reflected in quarterly data.

"The December 2010 quarter shows a spike in the number of floats and the value of funds raised, with activity falling away in the March and June quarters of 2011.

The short term outlook may remain choppy for a while, however, there is still a good pipeline of businesses that will look closely at the timing of a listing and the relative merits of an IPO versus a trade sale.

"It is likely the next financial year will again see the use of "dual track" IPO and trade sale processes as vendors seek to optimise outcomes and maximise competitive tension. Secondary private equity acquisitions are also likely to provide strong competition to the public markets. The success of recent floats such as that of Royal Wolf, however, demonstrates that opportunities still remain open."

 
  Mar 09 Jun 09 Sep 09 Dec 09 Mar 10 Jun 10 Sep 10 Dec 10 Mar 11 Jun 11
$billion raised 0.082 0.009 0.196 2.691 0.400 0.315 0.108 6.895 0.238 0.313
Number of IPOs 7 1 7 27 14 15 18 52 28 25
 

Mr Woosnam said the share price performance of IPOs in FY11 was also slightly better than the previous year.

"In FY10, only one in every three IPOs ended the year in the black, whereas this figure climbed to 42% in the latest financial year. Importantly, QR National, the year's biggest IPO, performed very solidly, recording an increase of 38%"

 
IPO share price performances in summary
 
  2006 2007 2008 2009 2010 2011
Total number of IPOs 169 221 201 28 63 123
Number of IPOs trading at or above issue price at year end 112 163 61 10 21 52
Percentage of IPOs trading above issue price at year end 73% 52% 4% 64% 33% 42%
Average of price performance 53% 30% -63% 25% 10% 11%
ASX100 18% 12% -40% 33% 11% 7%
ASX200 19% 12% -41% 31% 11% 7%
 

The year's best-performing IPO was Fortis Mining, which listed at 20-cents per share on 15 December after raising $3.5 million to fund gold and base metals exploration in Western Australia. The share price rose strongly following the acquisition of potash interests in Kazakhstan.

Nine of the top 10 companies by share price performance were resource or resource related. The best performing IPO outside the resources sector was Corporate Travel Management, which was ranked 8th overall and recorded a share price gain of 95%.

 
Top 10 IPOs by share price performance
 
Company name Listing date GICS/Ind. Description $m raised Share price gain/loss (%)
at 30 06 11
Fortis Mining 15 Dec Materials 3.5 575
Guildford Coal 22 Jul Energy 2.0 460
Bailey Minerals 2 Sep Materials 3.5 405
Carabella Resources 17 Dec Energy 12.0 366
Kidman Resources 18 Jan Materials 4.3 212
Forge Resources 23 Sep Materials 2.9 169
Maca 3 Nov Materials 60.0 145
Corporate Travel 15 Dec Commercial services 21.7 95
GR Engineering 19 Apr Capital goods 30.0 95
Phoenix Gold 22 Dec Materials 8.0 94
 
Four of the top 10 IPOs by size achieved price gains, led by mining services firm Maca (up 145%) followed by NEXTDC (up 70%), QR National (up 38%) and Royal Wolf (up 13%).
 
Top 10 IPOs by size
 
Company name Listing date GICS/Ind. Description $m raised Share price
gain/loss (%) at 30 06 11
QR National 22 Nov Transportation 4,052 38
Westfield Retail Trust 13 Dec Real estate 2,010 -1
ERM Power 15 Dec Utilities 100 -11
Royal Wolf Holdings 15 Dec Capital goods 92 13
Reva Medical Inc 23 Dec Health care 85 -10
Kula Gold 16 Nov Materials 80 -11
Blackgold International 22 Feb Materials 70 -38
Maca 3 Nov Materials 60 145
Onthehouse 3 Jun Retailing 55 -32
NEXTDC 13 Dec Software and services 40 70
 

The number of IPOs increased in all states, reflecting rising numbers of resource company floats across the country. Western Australia produced 63 IPOs or more than half of the national total, followed by NSW (26), Victoria (13) and Queensland (11).

Queensland and NSW dominated in terms of value of funds raised, thanks to QR National and Westfield Trust respectively.

 
Top 10 IPOs by state
 
  FY10 FY11
  Number Total raised ($m) Number Total raised ($m)
NSW 9 391.2 26 2,377.4
VIC 7 2,387.9 13 74.5
QLD 8 509.2* 11 4,330.5
WA 33 265.7 63 603.95
SA 3 113.0 6 46.5
NT 1 4.0 0 0
Other 2 340.3 4 121.7
Total 63 4,011.3 123 7,554.6
 
*includes $408.7 million from third and final instalment of BrisConnections.

Last Updated: 

Contacts

Name:
Steve Woosnam
Company:
Deloitte Australia
Job Title:
Partner, Corporate Finance
Phone:
Tel: + 61 2 9322 7531
Email
swoosnam@deloitte.com.au
Name:
Dawn Willis
Company:
Deloitte Australia
Job Title:
Corporate Affairs and Communications Manager
Phone:
Tel: +61 2 9322 5562
Email
dawillis@deloitte.com.au

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