New listings fail to fire
Many recent IPOs have so far been less than rewarding for investors
It’s early days yet, but most of the sharemarket’s latest debutants have not fared well since listing. In recent months eight new names have joined the NZX: Radius Healthcare, Auckland Real Estate, Harmoney, Rua Bioscience, NZ Rural Land, Third Age Health, My Food Bag and NZ Automotive Investments.
My Food Bag — the biggest of those new issues — has failed to fire since listing on March 5. The stock closed yesterday at $1.57, down from its issue price of $1.85, despite some upbeat broker reports.
Craigs Investment Partners, which this week initiated coverage of the company, rated My Food Bag as “overweight”, with a 12-month target price of $1.93.
Forsyth Barr has given the stock an “outperform” rating of $1.85 — in line with its IPO price.
Jarden, the joint lead manager for the issue alongside Forsyth Barr and Craigs, rated the company as a “buy” with a $1.90 target price.
Craigs said it saw a “good runway for earnings growth” in 2021 and 2022, supported by procurement savings.
Investors will be the judge when My Food Bag releases its results for the March 31 year on May 21.
Harmoney disappoints
Online direct personal lender Harmoney debuted last November at a discount to its A$3.50 issue price and has since slumped even further.
The stock last traded on the ASX at A$2.03 — down 42 per cent from the issue price — and $2.22 on the NZX.
Harmoney opted for a primary listing on the ASX, with a “foreign exempt” listing on the NZX.
In an earnings update this week, Harmoney said that across the group, loans to new customers increased 60 per cent to $44.1 million in the third quarter, up from $27.5m in the second quarter.
NZ Rural Land
NZ Rural Land’s share price has also been slow to get rolling since listing in December. The stock closed at $1.14. Its issue price was $1.25.
The company raised $75m in the public share float, which along with debt will give it about $100m to buy rural land. NZ Rural aims to acquire properties and lease them to farmers or other producers.
NZ Automotive
Shares in NZ Automotive Investments, the company behind one of the country’s largest used car dealerships, 2 Cheap Cars, closed at $1.05, down from its $1.30 February listing price.
NZ Automotive was a “direct” listing, which did not involve a capital raising.
Auckland Real Estate Trust, which specialises in investing in Auckland’s CBD, has not deviated from 79c since its December listing. The trust was already listed on the ASX before it joined the NZX .
Rua Bioscience
Medicinal cannabis company Rua Bioscience has slipped after starting strongly in October.
Rua was at 38.5c at the close of trading yesterday, down from its 50c issue price and a far cry from last year’s 70c peak.
Retirement upside
Out of the new issues to come to the market in recent months, the retirement sector has found favour.
Shares in Third Age Health, a medical services provider for the sector, closed at $2.40, up from its initial reference price of $2.15 but down from its early peak of $2.70.
In the same camp, Radius, a specialist health and aged-care provider for the elderly and disabled, closed at 99c, up from its 80c issue price. Neither Third Age nor Radius raised new capital.
NZX chairman James Miller said at last week’s annual meeting that the exchange’s “pipeline” of new issues had never been stronger.
“This includes the possibility of some equity listings of very significant scale — prospects that could have a positive impact on the NZX,” he said.
Buffett on IPOs
Warren Buffett, chairman and chief executive of United States investment giant Berkshire Hathaway, is not a big fan of IPOs.
“An IPO situation more closely approximates a negotiated deal,” he once told a Berkshire annual meeting.
“I mean, the seller decides when to come to market in most cases. And they don’t pick a time necessarily that’s good for you.” He also once told CNBC: “In 54 years, I don’t think Berkshire has bought a new issue.”
However it appears Berkshire broke its self-imposed rule last year when it invested US$735m in cloud data platform Snowflake.
On debut, the stock rocketed to US$245, having been priced in the IPO at US$120.
Snowflake now trades at about US$238 per share, down from last December’s peak of US$390.
Comvita on track
Jarden has given the thumbs-up to Comvita’s moves to reorganise itself.
The ma¯nuka honey exporter, which has had a chequered earnings history, has been changing to take the volatility out of its earnings.
The company this week said it now expects its operating ebitda for the June year to be in a range of $22.5m-$25.5m, up from a previously announced range of $20m-$23m, thanks to good cost control and a favourable sales channel mix.
“Although the harvest has come in below average, its new harvest model appears to be delivering, with only a small impact on earnings expectations more than offset elsewhere,” Jarden said in a research note. “Reducing the earnings volatility from its apiary business is a good step forward to providing earnings confidence and addressing the agri risk that has weighed on the stock in recent years.”
S&P index change
Today is the day changes to the S&P Global Clean Energy Index, which has Meridian and Contact as constituents, are expected to take effect.
The index is set to add 51 stocks to the existing 30.
By country, the index’s weighting will fall by 7 per cent for New Zealand, 3.7 per cent for Australia and by 2.7 per cent for China.
United States “clean” stocks will lift their presence on the index by 6.6 per cent, Denmark by 6.1 per cent and Italy by 4.6 per cent.
Speculation has swirled around Meridian and Contact in light of the reweighting of Blackrock’s Clean Energy exchange traded funds that will result from the index change.
Both stocks have gained ground in the month to date, despite speculation that the index revision will result in a wall of selling.
All will be revealed by the close of business today.
Pushpay downgraded
Forsyth Barr has downgraded its rating on donation technology company Pushpay to “underperform”.
During the greatest-ever year of demand for church technology, the broker fully expected Pushpay to capitalise on its dominant position in the US church market. That was based on its track record, the large gap between its product offering and competitors at the start of Covid-19, and the sizeable and growing market Pushpay was serving.
“Instead, our recent research suggests that over the past 12 months Pushpay has lost significant ground to its competition, with Tithe.ly growing its churches by 12,000 in the same period Pushpay grew by 309,” it said.
Forsyth Barr estimates Pushpay’s penetration of the top 100 churches has fallen from 58 in July 2020 to 52 as of March 2021. “We believe much of this is linked to Pushpay increasing its already premium price versus lowcost competition,” it said.