Capital raisings on the rise

29/07/2016 - 12:53

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Investor interest has swung strongly towards the resources sector this year, but opportunities remain for tech companies aiming to list on the ASX.

Capital raisings on the rise
NEW DIRECTION: Davide Bosio says there has been a shift to resources driven by gold and lithium. Photo: Attila Csaszar

Investor interest has swung strongly towards the resources sector this year, but opportunities remain for tech companies aiming to list on the ASX.

The shift in investor sentiment has become increasingly apparent over the past month, as mining and exploration companies have closed deals that would have been out of the question earlier in the year.

Gold and nickel miner Independence Group highlighted the shift with a $280 million raising that will be one of the largest by a Western Australian mining company this decade.

The Independence deal, jointly managed by Macquarie Capital and Euroz Securities, was two-and-a-half times oversubscribed.

“If you are a quality company, there is a lot of interest,” Euroz executive chairman Andrew McKenzie said.

“The east coast institutions are still underweight in resources, and a lot of our stocks are looking relatively cheap.”

Ramelius Resources, Prospect Resources and S2 Resources are among many others to have recently raised capital to strengthen their balance sheet (see table).

That’s been good news for local broking firms like Hartleys and DJ Carmichael (see table).

The turnaround in the market was highlighted in a smaller way by TNG’s decision to revive a spin-out of its base metal assets through subsidiary, Todd River Resources.

DJ Carmichael managing director and head of corporate, Davide Bosio, said there had certainly been a shift to resources driven by gold and lithium.

High-grade base metals projects are also attracting investor interest, and he has seen tentative interest in energy and coal.

“People are talking about those sectors for the first time in a long while,” Mr Bosio told Business News.

He said resources companies were taking the opportunity to bolster their coffers.

“We’ve come through a very sobering period for resources companies, they are putting away more money than they otherwise would, as demand from investors is now very strong,” Mr Bosio said.

He said the market was more cautious about the technology sector.

“Some tech companies are doing reasonably well, but it’s certainly slowed down,” Mr Bosio said.

“The market has quickly become a lot more discerning about the quality of technology stocks.”

Alto Capital director Adam Belton said there were still opportunities for quality tech stories, with his firm receiving unprecedented demand for its latest Perth-based IPOs.

3D printing firm Aurora Labs is planning to raise $2.8 million, and cyber safety company Family Zone is aiming to raise $4.5 million.

“Investors are still genuinely interested in being involved in quality new ideas with the potential to change the world around them,” Mr Belton said.

He said tech firms that have suffered the most are those that have under-delivered on investor expectations.

Aurora Labs and Family Zone are among at least 10 WA companies currently seeking to list on the ASX, with most of these pursuing a backdoor listing.

While a lot of fizz has gone out of the backdoor listing trend, it certainly isn’t dead – eight WA-related deals closed in the month of July.

The trend is continuing, with Star Striker recently completing a $3.5 million raising as part of the planned reverse takeover and listing of financial planning software firm Intiger Group.

The planned float of investor chat room HotCopper Holdings, which is seeking to raise $12.2 million, will test the market’s appetite for IPOs.

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