To many living outside Australia, the easiest way to relate to the world’s 13th largest economy is through many of her world-class artists – Cate Blanchett, Nicole Kidman, Hugh Jackman, Kylie Minogue, and so on.
And of course, surely you will hear about kangaroos and koalas.
What about Australian corporates? Quiz anyone on the street in your country about Australia’s top five companies and very likely most people would fail the test.
It is ironic but not surprising.
On Forbes’ latest list of global top 2,000 companies, only 32 are Australian, and only 17 made it to the top 1,000 list. BHP Group tops the Australian list, ranking 90th globally.
South Korea, the 12th largest economy, has 59 companies on the Forbes’ list, led by Samsung Electronics, global No. 4 company.
ECM laggard
In the narrower world of equity capital markets, Australia, too, has been a laggard.
Year to date, Australia has only priced USD 516.5m worth of initial public offerings, the worst showing since 2020, when the country raised a mere USD 156.35m via IPOs during the same period, based on Dealogic data.
But with the S&P/ASX 200 index up a tad over 4% year to date, dealmakers are cautiously optimistic about the country’s IPO market for the rest of 2023 or even into 2024.
Meanwhile, Goldman Sachs’ (GS) latest IPO Issuance Barometer, which gauges how conducive a macro environment is for IPOs and is scaled so that 100 is the ‘typical’ IPO frequency, read 93 in June, the highest mark since March 2022.
Rajeev Gupta, Partner at Sydney-based fund manager Alium Capital, said June’s reading is “extremely encouraging” and indicates a more normalized backdrop for the second half.
Reopening, at last
Stabilizing inflation and less aggressive monetary tightening, together with a sustained period of low volatility, “will help the IPO market reopen,” James Posnett, general manager at the Australian Securities Exchange’s Listings division, told this news service.
Another encouraging factor is that secondary capital raisings have held up well in 2023, he said.
For the year up to 25 July, Australia has raised AUD 13.6bn from 565 follow-ons, versus AUD 15.8bn from 502 deals in the same period last year, Dealogic data show.
It’s even more encouraging to see that some of the IPOs in the pipeline could potentially outsize many of the deals priced in recent years.
Redox, a chemical, ingredient and raw material distributor, priced on 5 June a USD 266m IPO, which nonetheless has lost 10% since debut. It was the largest IPO since November 2021, when Ventia Services Group raised USD 318m from its IPO. Ventia Services has rallied 71% since debut.
Size matters
But we are looking at a potential AUD 1bn (USD 675m) listing of Bain Capital's Virgin Australia airline, slated for November.
Pharmacy retailer Chemist Warehouse, which market commentators thought could fetch an up to AUD 5bn valuation in an IPO that had been expected to take place in 2021, is now the subject of a speculated reserve listing with Sigma [ASX:SIG].
Moore Australia Director & National Chairman of Corporate Finance Benjamin Yeo believes these will serve as litmus tests as they are both well-known names in Australia that retails will likely be excited about.
Or, perhaps the next to set the board alight will be grinding media supplier MolyCop, which is reportedly starting non-deal roadshows to Sydney- and Melbourne-based institutional investors soon for an IPO that could value it at AUD 2bn.
Punters will no doubt also be watching to see what happens with freight and logistics company Mondiale VGL and payment solutions provider Cuscal. Both reportedly presented to investors earlier this year, with Mondiale targeting a valuation of more than AUD 1bn while Cuscal was thought to be worth some AUD 500m.
Out of the 15 listings priced in the first half of 2023, only two raised more than USD 100m, and majority of the rest were below USD 10m.
But small can be beautiful.
As many as 92% of the first-half 2023 IPOs had their books filled, a 19-percentage-point increase from 73% during the same period in 2022, said Marcus Ohm, Partner at HLB Mann Judd, which has just published its mid-year 2023 IPO Watch.
UK-based health and wellness product maker Dragonfly Biosciences told this news service earlier in July it is on track for a 1 August listing on the ASX, through which it aims to raise AUD 5m.
Sydney-based immuno-oncology theragnostic company Glytherix told this news service this week (25 July) it has secured a cornerstone investor and expects to close its up to USD 10m pre-IPO by the end of August and is targeting a listing in late 2024, while Sydney-based medical practices group Ochre Health has told this news service it is now more open to going it alone with debt funding to keep growing while keeping an eye on the ASX.
Lengthy and painful private fundraising rounds over the past one to two years will serve as a reminder to companies of the relative beauty of going public.
Being publicly listed will let companies raise funds more efficiently, allowing them to better focus on business, exit opportunities for both international and external shareholders, not to mention more tangible valuations, Alium Capital’s Gupta noted.
Curvebeam AI, for one, opted for an IPO to avoid the “all-consuming” and costly private fundraising process and rather focus on executing on its business plan, Chief Executive Greg Brown told this news service.
The company closed the bookbuild for its AUD 25m IPO on 13 July, to be followed by a 23 August listing on an AUD 125m valuation.
Many companies have opted away from private rounds in the past years to avoid down rounds.
There is lots of pent-up demand for growth capital from companies that have resisted undertaking down rounds in the past few years and are now looking to the IPO markets to raise at more attractive valuations, said TWIYO Capital founding partner Stuart Cook, noting that valuations dropped significantly in the past two years, especially in the tech sector.
Compared with private rounds, while the IPO review process can be daunting too at the very least, investors’ enthusiasm is there for companies that pass regulatory hurdles, Dragonfly’s Saveall said.
The earlier the better
As IPO markets reopen, “which they invariably will as a new cycle begins”, the initial deals will likely perform well, according to Alium Capital’s Gupta.
In 2014-2021, the last big cycle for the ASX IPO market, companies that listed during the early years performed best, he said.
Wisetech [ASX:WTC] has gained 900% since 2016 listing, Telix [ASX:TLX] up 1400% since 2017, Smartgroup [ASX:SIQ] up 800% since 2014, IDP Education [ASX:IDL] up 600% since 2015, and Audinate [ASX:AD8] up 500% since 2017.
With an AUD 3.5trn pension fund – which has an ambition to hit USD 9trn in 20 years – under its wing, Australia clearly has a lot more to offer, other than its glamorous showbiz.
Analytics by Raj Saiya
