Why in­vestors are pil­ing into Syg­nia and An­chor Cap­i­tal

Financial Mail - Investors Monthly - - Front Page -

Older read­ers will re­mem­ber the tech boom on the JSE in the late 1990s, a time when sen­ti­ment was so frothy that any geek with a lap­top was tempted to float an “idea busi­ness” onto the JSE.

When the tech tide went out, of course, it ex­posed a slew of di­shev­elled com­pa­nies sans cash flow and hard as­sets.

Are we wit­ness­ing a re­peat now in the high-fly­ing wealth man­age­ment hub of the JSE?

That as­set man­age­ment sec­tor is start­ing to feel dan­ger­ously ex­u­ber­ant. Some mar­ket rat­ings look sur­real for a sec­tor that has largely been soberly as­sessed for most of the past decade.

In the mid­dle of Septem­ber, as­set man­ager Syg­nia, run by Magda Wierzy­cka, listed on the JSE, spark­ing a mad rush for its stock.

When Syg­nia of­fered stock to in­vestors in the book-build be­fore the list­ing at R8,40/share, the of­fer was over­sub­scribed by 20 times. That pri­vate place­ment of 31,2m shares aimed to raise R262m. And as soon as Wierzy­cka blew the horn at the JSE to sig­nal the open­ing of trade, the stock roared up, gain­ing an as­tound­ing 80% on the day to fin­ish at R16. (Cue “stags” do­ing merry jigs!)

Clearly, in­vestors are hun­gry for as­set man­age­ment com­pa­nies, thanks to the ex­tra­or­di­nary suc­cess of An­chor Cap­i­tal (up 320% from R3,50 when it listed in Septem­ber 2014) and Corona­tion, up 500% in five years.

Wierzy­cka says the frenzy for Syg­nia shares took her by sur­prise. “Dur­ing our prelist­ing road­shows, the sen­ti­ment was luke­warm. My sense is that peo­ple came to those pre­sen­ta­tions, far more peo­ple than we ex­pected, and left believ­ing the story. But we never an­tic­i­pated this,” she says.

No fewer than 61 in­sti­tu­tions ap­plied — hedge funds, as­set man­agers and other wealth man­agers.

She says it’s not that Syg­nia un­der­priced the shares. “We priced it at a price-to-earn­ings ra­tio of a shade un­der 15, and that seemed to be the me­dian. We thought it was fair, and it left a bit on the ta­ble, ex­pect­ing it would ap­pre­ci­ate a bit, but not like this,” she says.

Is it just that in­vestors have aban­doned all rea­son in their fer­vour for as­set man­age­ment stocks?

“Well, An­chor was clearly

❛❛ In­vestors are hun­gry for as­set man­age­ment com­pa­nies, thanks to the suc­cess of An­chor Cap­i­tal and Corona­tion

Magda Wierzy­cka and her hus­band Si­mon Peile at the list­ing of Syg­nia on the JSE.

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