Libstar shares slip in lacklustre main-board listing
Household brands distributor Libstar made a dull market debut on Wednesday with its shares falling below the prelisting issue price.
The lukewarm listing was not totally surprising as the company, which raised R1.5bn in fresh capital, placed its shares at the lowest level of its indicative pricing range of R12.50-R16 per share.
Investors have also recently shown a lack of appetite for consumer stocks, with a sluggish economy pinching discretionary spending.
Libstar shares snuck as low as R11.61 before finding support at R12.34 at the close of trade. This was 1.28% off the issue price. Trade was fairly vibrant with shares worth R277m changing hands.
While R1.5bn of fresh capital was raised, certain shareholders — including international investment firm Abraaj — also sold down their shareholdings to the tune of R1.5bn. A R800m dividend was also paid to existing investors ahead of the listing.
Anthony Clark of Vunani Securities said the weak debut by Libstar highlighted the market’s disenchantment with the methodology and rationale for listing the company. He noted that other food brands groups that had listed on the JSE in recent years – like Clover and Rhodes Food Group — initially dropped below their prelisting share placement price. He expected the Libstar share price would remain “under the weather” until the market regained its poise.
Libstar CEO Andries van Rensburg said the company had hoped for a better price for its placement of shares ahead of the listing. “Now that we are in the market the share must find its place.”
On a longer-term view, a note from FNB Securities earlier in May calculated a 12-month target price of R15.03 “on conservative assumptions” with a fair value of R13.42. But FNB saw a lack of scale and competitive advantage without the defensive characteristics of strong brands.
Libstar — which boasts annual revenue of about R9bn — owns brands like Lancewood (cheeses), Goldcrest (honey), Cape Herb and Spice, Denny (mushrooms and sauces) and Cook ’n Bake.