UPDATE 2-Poor debuts send summer shiver through hot Australian IPO market

Tue Dec 17, 2013 1:56am EST

* Pact Group's shares fall 12.6 pct from IPO price

* GDI Property Group shares lose 11.5 pct

* Host of new issues in pipeline in 2014

By Jackie Range

SYDNEY, Dec 17 (Reuters) - Disappointing debuts on Tuesday from Australia's biggest initial public offering this year, Pact Group Holdings Ltd, and a property investment firm cast a shadow over prospects for the nation's bulging IPO pipeline in 2014.

Investor fatigue looks set to put pressure on a rash of deals to come, and companies may be forced to price their IPOs with scope for shares to rise and an eye on how on long the window for new listings will stay open.

"I'm afraid the market's got choked on the new issue syndrome," said Stuart Smith, a senior client adviser at Bell Potter Securities Limited in Brisbane.

"I haven't participated in any and my clients are happy not to," Smith said.

Shares in packaging firm Pact fell 12.6 percent from their IPO price to finish their first day of trade at A$3.32, after the company raised A$649 million ($581.54 million). Property investment manager GDI Property Group Pty Ltd slumped 11.5 percent from its IPO price to close at A$0.89, after raising around A$310 million. The broader market was 0.27 percent higher.

BLACK CHRISTMAS

The two lacklustre debuts throw into question whether investors, wounded by poor performances, will be prepared to plough more money into new companies at a busy time for IPOs in Australia.

They come after other new listings have also performed badly. Online comparison company iSelect Ltd's shares have only touched their IPO price of A$1.85 on one day since listing in June, and closed on Tuesday at A$1.33.

Nine Entertainment Co Holdings Ltd, the second biggest IPO in Australia this year, debuted earlier this month and is also trading below its offer price of A$2.05, with shares closing at A$1.92.

Around $6 billion is expected to be raised this year, with predictions of at least a further $5.5 billion in 2014.

The raft of deals to come include travel insurance and medical assistance provider Cover-More Group Ltd, which plans to start trading on the Australian stock exchange on Thursday after raising A$521 million in the nation's third biggest IPO this year.

Next year a host of companies are expected to list, including government-owned insurer Medibank Private and healthcare business The Healthscope Group, owned by private equity funds The Carlyle Group and TPG Capital Management, according to a banking source.

Facilities management outfit Spotless Group, owned by Australian private equity fund Pacific Equity Partners, is also expected to go public. The long-delayed $3 billion IPO of Hong Kong utility CLP Holdings Ltd's Australian unit, EnergyAustralia, may also take place, bankers say.

But some investors are eschewing new issues, believing they do not offer value and preferring to focus on stocks that are already listed.

"We've got enough good stocks in the market to buy," Smith at Bell Potter Securities Limited.

PRESSURE FOR GOOD DEALS

Deals that disappoint investors pile pressure on companies still to come to market to offer investors a good deal by pricing their IPOs on the cheap side.

"I think it definitely puts the pressure on, somewhat, on the price that's likely to be achieved," said Akshay Chopra, an analyst at Karara Capital in Melbourne.

And amid the risk of the Federal Reserve calling an end to easy money in the United States, if companies cannot get the deal they want, they might opt not to list at all.

"With tapering amongst other things, the outlook for equity markets might be different again next year ... then that in turn may also influence the decision for companies whether they want to go to IPO or not," Chopra said.

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