31/10/2019 - 15:31

Primewest winning in tough IPO market

31/10/2019 - 15:31

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Investors across Australia have backed Primewest’s ambitions to expand its offering via an ASX listing, with the company confirming it has raised its targeted $100 million.

Primewest winning in tough IPO market
Directors John Bond, David Schwartz and Jim Litis are upbeat around Primewest's growth prospects post-float. Photo: Gabriel Oliveira

Investors across Australia have backed Primewest’s ambitions to expand its offering via an ASX listing.

Primewest has braved the most difficult initial public offerings market in years as it closes in on an ASX listing.

The business has managed to raise its targeted $100 million at the same time that billions of dollars in floats are being pulled over concerns of overly-high valuations and continuing global economic uncertainty.

Western Australia’s biggest home-grown property play will begin trading on the ASX on November 8.

Chief executive John Bond said Primewest had been able to source $50 million of investment from its existing clients, while Sydney-based lead manager Moelis Australia secured the remaining capital.

Mr Bond said there was significant interest in the float, with both tranches significantly oversubscribed.

“We are lucky that the property space is definitely in demand and yield is definitely in demand, so we happen to be providing two of those key ingredients that are of interest to investors,” Mr Bond told Business News.

“We’ll be paying a 5 per cent yield, which will be fully franked, so that’s pretty attractive in this market.”

Mr Bond said Primewest would use the capital raised to expand its wholesale mandate business, building on capacity developed following a tie-up with Singapore’s GIC, which recently appointed Primewest to seek investment opportunities in commercial property in Perth and Brisbane.

“Typically they require an investment manager to have equity in the deals, so we’d like to be able to put that in off our balance sheet rather than go to syndicate investors,” Mr Bond said.

“It’s much more seamless to do that, and it’s an alignment of interests with the institutions.

“Other than that, we think there are lots of opportunities where we can deploy equity. We’ve been a management company solely, we haven’t had a balance sheet.

“We get lots of opportunities across our desks that we haven’t been able to do anything with.

“I think it’s going to be an interesting time in the property space; I can’t go into too much detail, but we have things that we are looking at and talking about.”

Primewest’s float success comes at a time when major floats are being pulled from the market en masse, with investors showing little appetite for new companies on the ASX.

Several high-value IPOs have been scrapped in recent weeks, including Singapore-based Property Guru’s $1.4 billion plan, Latitude Financial’s $3.2 billion float, and Retail Zo’s $482 million listing.

Data from EY shows that, in the first half of 2019, IPOs in Australia had declined 43 per cent by volume and had plunged 73 per cent in value compared with the first six months of 2018, with small-cap listings in technology, materials and healthcare drawing the most investor interest.

HLB Mann Judd partner Marcus Ohm described the IPO market as the worst he’d seen for quite a number of years.

“We’ve been reporting the IPO market since 2005, and it’s pretty bad out there at the moment, unfortunately,” Mr Ohm told Business News.

“We were hoping it would improve quite a bit over the second part of the year but it’s just not happened, people just aren’t willing to support what IPOs are on offer at the moment.

“And that’s a challenge. The large ones aren’t getting away, primarily on valuation issues, and the smaller part of the market’s not there either; it’s pretty dire at the moment.”

Primewest’s listing follows WA residential property play Nicheliving having several stalled attempts at getting an ASX float over the line in the past two years.

Nicheliving announced plans to list on the ASX in late 2017, seeking to raise up to $12 million.

Midway through last year, however, Nicheliving revised its listing plans, reducing the capital amount to $5.7 million after a Singaporean investment group took a cornerstone stake in the company.

The builder-developer withdrew its float in December, while Nicheliving managing director Ronnie Michel-Elhaj told Business News this week the company was simply waiting for the right time to relaunch the IPO.

“In our first path to IPO we actually achieved what we needed to achieve in terms of capital raising – the interest was certainly there,” Mr Michel-Elhaj said.

“With the fact that we are now the largest medium-density developer in WA, our focus is now to get to a critical point where our projects are at the right level and we are trying to reach the right timing to be able to relaunch when we feel there is demand.”

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