Mining, energy take IPO reins

SPECIAL REPORT: A significant uptick in the number of resources stock floats in WA mirrors a national trend driven by improved investor sentiment and rising commodity prices.

In the 12 months to September, 60 per cent of Western Australia’s 50 initial public offerings were for mining or energy companies, according to data compiled by Business News.

In comparison, the resources sector accounted for less than half (18) of the previous year’s 37 ASX listings in WA.

Nationally, data from HLB Mann Judd shows that materials listings comprised 29 out of 110 stock floats in 2017, while half of the 58 IPOs completed this year (calendar 2018 to August) are from the resources sector.

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And mining or energy companies make up 13 of the 28 upcoming floats in the ASX pipeline.

HLB partner Marcus Ohm told Business News mining IPOs had been gaining momentum since 2016, when technology companies were predominating.

“The trend is generally driven by two things – improved investor sentiment and increased commodity prices, or at least expectations of increased prices,” Mr Ohm said.

“The improved sentiment in resources IPOs has developed off the back of some excellent returns on share prices throughout last year, especially from the traditional mining states of WA and Queensland.

“The upswing in confidence has also been supported by better subscription rates in 2017-18.

“The commodity price outlook is a little mixed. However, the general outlook appears to be that prices will be supported with demand increasing going forward.”

Mr Ohm said the trend appeared to be a return to more normalised activity since the difficult conditions for juniors in the capital markets several years ago.

The largest local mining float so far in 2018 was manganese miner Jupiter Mines’ $240 million IPO in April.

That marked the biggest resources IPO since BHP Billiton spun-out South32 in 2015.

A number of gold explorers have listed on the ASX recently, including Neil Warburton-led Coolgardie Minerals, Leonora-focused Kingwest Resources, and Osborne Park-based Cygnus Gold.

Two of the larger IPOs in the last few months have come from established businesses with steady cash flow, with engineering company Primero Group raising $25 million and Perth company Stealth Global Holdings tapping investors for $12.5 million.

Primero’s earnings for the year to June 2018 exceeded its prospectus forecasts, with revenue of $85.2 million and a net profit of $5.2 million.

Stealth recently began trading on the ASX, with most of the proceeds used to acquire local firm Heatleys Safety and Industrial for $9 million.

Stealth was established in 2014 as a supplier of safety, industrial, and workplace consumables.

The merged group is expected to have pro-forma revenue of $65.9 million in the year to June 2018 and $76.7 million in FY19.