Investment banks invited to pitch at possible sale
AUCKLAND: Having appointed an Australian consultant to provide advice on the possible sale of its 18% stake in Auckland Airport, the Auckland Council is now lining up investment bankers for a beauty parade, Stock Takes understands.
Investment banks have been invited to pitch for roles in a share sale, should it go ahead, and have been told to put their best foot forward before the end of this week.
Earlier this month the Auckland Council announced it had hired Flagstaff Partners, an Australian consultancy, to provide specialist advice on a possible sale.
Established in 2009, Flagstaff was set up by Deutsche Bank’s former global cohead of mergers and acquisitions, Tony Burgess, and exANZ Banking Group chairman Charles Goode.
The council had already contracted Flagstaff to carry out a review of Ports of Auckland Ltd (POAL) looking at ownership options, so it seems this is a logical extension of that role.
While the airport share sale is still up in the air — a formal decision on the $2 billion stake has yet to be made — Auckland Mayor Wayne Brown is determined to go ahead with it as a way to retire debt and ease the pressure building on ratepayers.
A source familiar with these sorts of transactions suggested Macquarie and UBS were frontrunners for the lead manager role.
Jarden is ruled out because it already acts for the airport.
Local firms Craigs Investment Partners and Forsyth Barr would likely play a role if any offer is opened up to retail investors.
While a sizable trade, big institutions are likely to soak up the stock very quickly, much like they did when the Government sold down its shares in Air New Zealand.
The council has not said how much it was spending on the advisory contract with Flagstaff. ‘‘I’m sure they will be well rewarded for doing their job,’’ a source told Stock Takes.
Fisher & Paykel Healthcare profit beat unlikely
Analysts see a low likelihood of Fisher & Paykel (F&P) beating expectations at its results briefing today, with one broker advising investors to consider taking some profits at current levels ahead of the announcement.
The healthcare technology company gave guidance in late January of revenue between $1.55 billion to $1.6 billion.
Forsyth Barr’s Matt Montgomerie said it expected F&P to show a strong second half, aided by abnormally strong revenue gains from the flu season, and China Covid demand.
Mr Montgomerie forecast F&P’s revenue to be at the upper end of its guidance range but saw little chance of it exceeding that.
‘‘Following recent competitor results and data releases, we see a low likelihood of a material beat, relative to expectations.’’
Mr Montgomerie had an ‘‘underperform’’ rating on the stock and had a target price of $22.90 per share — well below its Wednesday opening price of $25.34.
Craigs Investment Partners’ Stephen Ridgewell and Rob Morrison went a step further and said investors should consider taking profits ahead of the result.
‘‘FPH [Fisher & Paykel Healthcare] shares have rallied circa 20% since the January upgrade and are now trading on 50x FY24 estimated price to earnings, with the markets now arguably anticipating a ‘beat and raise’ at the upcoming result on May 26, which is looking less likely.
‘‘We think investors should consider taking some profits at current levels.’’
Mr Ridgewell and Mr Morrison pointed to F&P’s closest competitor, Vapotherm, which reported a soft March quarter result recently.
‘‘While many commentators [and investors] question the relevance to FPH of Vapotherm’s results, our regression analysis indicates an 86% correlation of their respective High Flow consumables revenue,’’ they said in their analysis.
‘‘Vapotherm’s 11% consumables growth, therefore, suggests FPH will deliver towards the lower end of its guidance range.’’
Craig’s analysts have a neutral rating on F&P and a target price of $24.94.
Jarden’s Adrian Allbon and Nick Yeo expected F&P’s revenue to be $1.58 billion — down 6% on its previous financial year and in the midrange of its guidance.
But they are more upbeat on its FY24 earnings, although they do not expect any guidance from the company until the annual shareholders’ meeting in late August.
‘‘We currently forecast revenue growth of 10% to $1.74 billion in FY24 [2% ahead of consensus] and NPAT [net profit after tax] up 26% to $303 million [in line with consensus].’’
Mr Allbon and Mr Yeo said the key driver of this growth was hospital consumables, and they saw steady growth in home care sales.
They maintain an overweight rating on the stock with a target price of $25.50.
Virgin IPO could raise $A1 billion ($NZ1.07 billion)
Bain Capital is targeting November to relist Virgin Australia Airlines Pty Ltd through an initial public offering that could raise about $A1 billion, the country’s largest in two years, according to people familiar with the matter.
The private equity owner plans to sell down about 40% of its stake in the carrier, which it rescued in a $A3.5 billion deal in 2020, people, who asked not to be identified as the information was private, said.
A listing could give Virgin Australia a valuation of nearly $A2.5 billion, they said. Its rival Qantas Airways Ltd has a market value of around $A11.6 billion.
Bain Capital and its advisers planned to resume meeting prospective domestic investors by the end of July, the people said.
The airline had completed international roadshows and put the local ones on hold as Virgin Australia CEO Jayne Hrdlicka took leave around the death of her husband, the people said.
Deliberations were ongoing and details of the IPO, including size and timeline, could still change, they said.
A spokesman for Bain Capital responded to a query by referencing Virgin Australia chairman Ryan Cotton’s note to staff on May 10, saying the business was in ‘‘good shape’’ and planning for the IPO was ‘‘well advanced’’.
‘‘While there is still no date set and our ultimate window of opportunity will depend on market conditions, we are hopeful this process will progress over the coming quarters,’’ Mr Cotton said.
Virgin Australia referred Bloomberg News back to Bain Capital for comment.
Bain Capital was set to realise a full return on its original investment, cashing out $A730 million from the airline, Bloomberg reported earlier this month.
Virgin Australia collapsed under a pile of debt in 2020, just weeks into the pandemic. It has transformed itself from a lossmaking entity into a profitable carrier by cutting costs, simplifying its fleet and tapping a huge postCovid rebound in travel demand.
Goldman Sachs Group Inc, UBS Group AG and Barrenjoey Capital Partners Pty Ltd have been selected as lead managers for the airline’s planned IPO, Bloomberg reported in February. —
Additional reporting Bloomberg.