08/10/2009 - 00:00

Slowdown tipped after $10bn start to the year

08/10/2009 - 00:00


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Capital raisings by WA stocks were subdued during the September quarter as companies with larger equity appetites headed overseas.

THE capital raising market is tipped to quieten down over the next six months after a record year to date, as the value of secondary raisings in the September quarter crept higher.

During the three months to the end of September, Western Australian companies listed on the local stock exchange announced plans to raise a total of $2.01 billion.

So far, $1.69 billion has been raised with various rights issues, share placements and raising deals still open for some companies.

Of the 188 capital raisings recorded in the September quarter, about 22 were private placements, most made to Asian and North American investors.

The September quarter figure is 14.2 per cent higher than the previous quarter, where WA-based companies planned to raise $1.76 billion.

So far this year WA stocks have raised about $10 billion.

However, both periods were a far cry from the March quarter's mammoth capital raising efforts, with $6.5 billion raised, spurred by massive equity raisings from Wesfarmers and Fortescue Metals Group.

The big March quarter figures were achieved despite the All Ordinaries index dipping 3.4 per cent during the period, compared to the index's September quarter surge of 20 per cent, the largest quarterly gain in 22 years, according to CommSec.

“The capital raising market was extremely hot and that's because a lot of companies, given the way that the world unfolded from August last year to March, needed to raise cash for various projects," DJ Carmichael managing director Ian Dorrington said.

“It's just got to settle down a little bit from where it was because it was a very, very unusual set of circumstances.

“I can't see the amount of capital that was raised over the last six months, I can't see the next six months being anywhere near that and I think the significant reason for that is that most of the companies that needed to raise cash have done so."

Patersons Securities topped the stockbrokers' list in terms of number of raisings for WA-based stocks with 36 in total, raising $247.8 million.

CPS Securities managing director Tony Cunningham said Patersons' acquisition of Montagu Stockbrokers and Tolhurst Group's broking division, combined with the closure of Hogan and Partners, indirectly boosted the firm's capital raising efforts, with a record $30 million reported in the September quarter.

Mr Cunningham added that a bounce in commodity prices also helped with sophisticated investors waiting with their chequebooks open for a good quality story, regardless of investment location.

However it was the overseas stockbroking firms that carried out the larger secondary raisings, with Paladin Energy's $419 million institutional placement the biggest capital raising for the September quarter.

The uranium miner's raising was managed predominately by Canadian firms RBC Capital Markets, Cormark Securities, Dundee Securities Corporation and GMP Securities, as well as UBS.

Most of the same firms, including BMO Capital Markets and Haywood Securities, also managed Mirabela Nickel's $48 million placement.

Both resource companies are dual-listed on the Toronto Stock Exchange, a necessary strategy for stocks that handle commodities, such as uranium, or hold projects in emerging economies such as Brazil, with which Australian investors are not too familiar, Mr Dorrington said.

“Having listings overseas is undoubtedly used to increase the net which [companies] can cast to raise capital, which has got to be first and foremost," he said.

“Some of those companies, like Paladin for example, are finding it easier to raise money for a uranium story in Canada than perhaps here in Australia.

“The Canadians know the uranium story and understand the uranium story to a far greater degree than many Australians do, so it's logical for [companies] to exploit those opportunities."

DJ Carmichael, Perth's oldest stockbroking firm, is currently ramping up its capital raising efforts and is aiming to tap into its UK connection with parent company WH Ireland Group.

“There is a lot of capital in the UK and Europe looking for the resource commodity story, and a lot of that capital is quite happy to invest with companies that have operations based in Africa, Eastern Europe, Indonesia, for example, whereas the Australian investor has historically been a little cautious," Mr Dorrington said.

“We are really starting to ramp up the business link between ourselves and Ireland, so that's going to give us significant opportunities to raise lots of capital out of the UK."

New stockbroking firm Blackswan Equities is another broker looking to increase its capital raising efforts as soon as its 12-month business plan is implemented.

Chief executive Simon Lyons said the firm's analysts were currently looking at the mining services sector, which was set to benefit from the Gorgon and other oil and gas projects.


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