Cautious period for IPO market

THE number of Western Australian companies considering listing on the local stock exchange may be gaining momentum, but the frantic activity from a couple of years ago is not likely to occur any time soon.

And that could be a good thing, according to CPS Securities managing director Tony Cunningham.

“Generally, when you start to see a lot of floats it indicates the market is starting to top out," Mr Cunningham said.

After virtually no activity in the initial public offer market in the first six months of the year, businesses are again starting to consider a listing on the Australian stock exchange.

During the September quarter, three WA-based companies floated on the Australian Securities Exchange - Triton Gold, Sino Gas and Energy Holdings, and Westoz Investment Company.

About $7 million was collectively raised from Triton and Sino through their initial public offers, while Westoz offered free bonus options to shareholders of Perth stockbroking firm Euroz, the parent company.

While the amount of floats is slim - only five WA-based companies have made it to the bourse so far this calendar year - the number of businesses seeking to list on the ASX is growing.

At time of publishing, 12 local companies have made public their ASX aspirations, five of which will be spin-outs of already existing companies.

But while IPO activity is picking up, Patersons Securities executive director corporate finance, Aaron Constantine, believes it's not an IPO environment just yet, especially at the smaller end of the market where the risk element was highest.

“I think [the IPO market] is just moving forward, it's a lot better than it was six months ago, but then again markets are a lot better than it was six months ago," Mr Constantine told WA Business News.

“Interest rates look like rising, the government has stopped handing money out and the US isn't going brilliantly.

“There's plenty of sound reasons to be cautious but the sun keeps rising in the east and the world keeps moving forward, so the environment will open up for IPOs and the Myer float is showing us that."

Mr Constantine added that backdoor listings remained a popular option for companies and investors, which he believed were perceived as less risky than IPOs at the moment.

He added the property sector would be one to watch out for, with opportunities for patient capital.