RPT-Australia, NZ put some fizz back into Asian IPO market
(Repeats to media clients, no change to text)
* $8.9 billion seen raised through IPOs in 2013
* Risk that good environment for listings may not last
* Federal Reserve's moves on stimulus seen as key
By Jackie Range
SYDNEY, Aug 30 (Reuters) - Australia and New Zealand's initial public offering market is set to return to levels not seen since the global financial crisis almost killed it stone-dead, with listings expected to rise five-fold this year compared to 2012.
Bankers say successful recent deals, attractive company valuations and upbeat earnings seasons are contributing to a surge in IPOs on both sides of the Tasman Sea, offering new opportunities for investors and underwriters in an otherwise bleak period for Asian listings.
"The market's at a good level for people to do deals, to sell new companies, and it's also at a level where investors are looking for value," said Campbell Lobb, Credit Suisse vice chairman of investment banking in Australia.
IPOs worth $8.9 billion are expected in Australia and New Zealand this year, from a mere $1.6 billion last year and at the highest level since 2005 when the market swallowed deals worth $11.8 billion, according to Thomson Reuters data.
IPO volumes for the Asia-Pacific region, by comparison, have tumbled 32 percent so far this year to $18.7 billion, thanks mostly to a steep decline in Malaysian offerings and the lack of deals in mainland China where regulators have frozen approvals.
Relatively high market valuations in Australia and New Zealand, meanwhile, are giving vendors room to offer assets at competitive prices while ensuring a good return on their investments. Australia's benchmark S&P/ASX 200 index is trading at a price earnings multiple of 16.77 times and New Zealand's NZX 50 index is at 17.55 times, compared with the Hang Seng in Hong Kong at 9.99 times.
Australia's S&P/ASX 200 is trading near five-year highs while the NZX 50 has risen close to record territory. Investors in both countries are hunting for value.
New Zealand's IPO market is the standout, driven by government privatisations as it seeks to restore its budget surplus.
May's NZ$1.7 billion ($1.3 billion) Mighty River Power Ltd IPO will be followed in November with Meridian Energy Ltd IPO-MEL.NZ, which could raise some NZ$3.2 billion in what would be the country's largest IPO. Those sales have been supplemented by petrol retailer Z Energy Ltd, making 2013 a record year for IPOs in the country.
Meridian is seen as offering international investors a play on the nation's robust economy. But given its size it is also expected to be priced at a discount to attract investors, since big initial public offerings can be priced a bit more cheaply to entice enough investors. That could make it difficult for other offerings to compete, market watchers say.
In Australia, deals like in-vitro fertilisation business Virtus Health Ltd, which has seen its share price jump 19.2 percent since listing on June 11, have whetted investors' appetite for new stocks.
Among the deals in the pipeline, Australian media and entertainment company Nine Entertainment Co. Pty Ltd IPO-NEL.AX is expected to raise around $1.1 billion and online foreign exchange provider OzForex around $540 million. Nine Entertainment and OzForex declined to comment.
EYES ON FED, CHINA
Even so, analysts warn the desire for new issues may wane given predictions of market turbulence if the Federal Reserve eases off on its stimulus programme in the coming months. Slower-than-expected growth in China, Australia's biggest trading partner, also could throw a spanner in the works.
"You will start to find that liquidity that's in the market, which is what an IPO needs, will start to dry up," said Evan Lucas, a Melbourne-based market strategist at financial spread betting company IG. "The company that is coming online has to be incredibly enticing to actually therefore win out."
Underscoring the risks, diversified funds manager Centuria Capital Ltd on Tuesday scrapped its planned listing of the Centuria Property Trust due to insufficient demand.
Nonetheless, bankers predict more deals to come, including credit checking company Veda Group and insurer Genworth Financial Inc's Australian enterprise. Veda Group declined to comment.
Genworth has said it was targeting the fourth quarter of 2013 or later for an IPO of up to 40 percent of its Australian mortgage insurance business. The company postponed a planned Australian IPO in May 2012 after a loss in the first quarter of that year.
"Overall, the Australian IPO market has seen some improvement but uncertainty regarding recent outlooks in the mining sector and from China make us cautious," Genworth chief executive Thomas McInerney said in a call with analysts in July.
The timing of deals will be crucial if issuers are to avoid market volatility, a major negative for IPOs, resulting from uncertainty about when the U.S. Federal Reserve will call an end to easy money in the United States.
"You don't like to buy ... when things go down, and in volatile markets the chance of having that happen is probably greater and when it does happen, it's probably larger," said Sean Walsh, head of Equity Capital Markets for Goldman Sachs in Australia.
The market has been "moving along quite nicely" since the Fed promised there would be no sudden end to its bond-buying programme, he said. Investors will closely watch the Fed meeting in September for signs the U.S. central bank could start reining in its stimulus programme, market watchers say.
For now, better than expected reporting seasons in Australia and New Zealand have helped feed company valuations, bankers say, giving potential vendors confidence and investors an incentive to look favourably at new listings.
"Often they'll find better value in an IPO rather than something they are starting to feel is expensive, such as the existing listed market," said Lobb at Credit Suisse.
($1 = 1.2821 New Zealand dollars) (Reporting by Jackie Range; Additional reporting by Elzio Barreto; Editing by Stephen Coates)
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