04/04/2006 - 22:00

$74m in local IPOs to March – Deloitte

04/04/2006 - 22:00

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Western Australia produced more than half of the country’s listings and raised just under half of the total combined capital during the March 2006 quarter, with WA companies leading the pack.

$74m in local IPOs to March – Deloitte

Western Australia produced more than half of the country’s listings and raised just under half of the total combined capital during the March 2006 quarter, with WA companies leading the pack.

Deloitte Corporate Finance’s latest quarterly initial public offer (IPO) survey found WA produced more listings in the three months to March 31 2006 than any other state, with 12 IPOs raising $74.2 million.

This compares with the national figure of 22 IPOs, for a combined capital raising of $165 million, for the three months to March 31 2006.

Even though IPO activity in WA defied a downturn at a national level for the last quarter, it was still well down on the record-breaking December 2005 quarter, which was boosted by the $741 million IPO of Alinta Infrastructure Holdings.

In the previous corresponding quarter, this state produced eight IPOs that raised $47 million, while nationally there were 31 IPOs that raised $1.64 billion.

Deloitte Corporate Finance partner Tom Henderson said surging commodity prices and investor interest in WA’s natural resources was driving the high level of IPOs in the west.

“We are still going to see a high level of activity in IPOs into the foreseeable future,” he said. “The mining sector is doing most of the IPOs, and until you see a softening in commodity prices, then you’ll see further IPOs.”

Mr Henderson told WA Business News the activity of China and India in the resource market would keep commodity prices strong into the foreseeable future.

Western Australian companies West Perth-based Red Hill Iron Ltd and Northbridge-based consulting engineers VDM Group Ltd led Australia’s top five performing IPOs, up to the March 21 survey date, however, post survey, Perth-based uranium explorer Encounter Resources Ltd topped both companies.

Since it’s listing on March 24, Encounter Resources has gained 255 per cent on its issue price of 20 cents, closing at the end of the quarter at 71 cents. 

The company, and its joint venture partner West Perth-based Avoca Resources Ltd, lodged a prospectus in February to raise $ 4 million to be used for further development of their arrangement for the exploration of uranium deposits in WA.

Red Hill Iron, which was formed through the amalgamation of Giralia Resources NL’s West Pilbara tenement holdings with those of a private syndicate, listed on February 14 at an issue price of 20 cents and raised $4 million.

At the end of the quarter, the company’s share price was 52 cents, returning a gain of 160 per cent on its issue price.

Red Hill Iron general manager Tim Boddington said the underlying reason for the gain was the iron ore-specific exploration joint venture with API Management Pty Ltd in its West Pilbara tenements, which includes known Channel Iron Deposits. 

VDM Group listed on February 15 at an issue price of $1 and raised $8.2 million. At the end of the quarter, the company’s share price was $1.90, returning a gain of 90 per cent on its issue price.

The Perth-based consultancy, established in 1978 by Andrew van der Meer, decided to list on the ASX earlier this year to expand its business.

Both Red Hill Iron and VDM Group were listed in the survey above the average gain of 73 per cent for the five best performing IPOs and were above the market average for the March quarter of 27 per cent (up to the survey date of March 21).

Among the other WA companies to list were Malaga-based water company Refresh Group Ltd, which listed on March 29 and made a 45 per cent gain on its issue price. The water company uses a patented US system to produce steam-distilled water.

Chalice Gold Mines Ltd, which has 2,200 square kilometres of gold tenements across WA, posted a gain on its issue price of 42.5 per cent. The company listed on the 24 March and raised $7.5 million, which it plans to use to explore the gold assets it acquired from Bullion Minerals.

Shipping services provider Richfield International Ltd, which has a representative office in Perth, made a 35 per cent gain for the quarter following the company’s listing on March 23.

Junior gold explorer Cortona Resources Ltd, which listed on March 21, has made a 30 per cent premium on its issue price of 25 cents, while junior gold explorer Azumah Resources Ltd, which listed on January 9, has made a 12.5 per cent premium on its issue price of 20 cents as at March 31. 

But not all WA-based companies made a premium on their issue price for the March quarter. Capital Intelligence Ltd, which listed on January 23, posted a fall of 20 per cent on its issue price of 20 cents, while Central Petroleum Ltd’s share price fell 17.5 per cent on its issue price of 20 cents following its listing on March 7.

Nationally, Toro Energy was up 310 per cent on its issue price of 25 cents, Australasia Gold up 70 per cent on its issue price of 20 cents, and Oaks Hotels and Resorts was up 65 per cent on its issue price of $1.

Resource floats outnumbered industrials in the March 2006 quarter (15 versus seven) with gold, oil and gas and uranium IPOs the main drivers of the increase, accounting for 13 or more than half of all IPOs in the March 2006 quarter.

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