Member log in

UPDATED: Solid market debut by Metro Glass in biggest listing since Genesis

Shares of Metro Performance Glass, New Zealand's largest glass processor, advanced 4.1 percent in early trading on their NZX debut, as investors looked for easy-to-value businesses with ready dividends in a stock market busy with companies seeking funds for growth. 

The shares [NZX: MPG] recently traded at $1.77 after having first traded at $1.75, up from its $1.70 IPO price and giving the company a market capitalisation of $327.5 million. The IPO raised $244.2 million with private equity owners Crescent Capital and Anchorage Capital taking some $230.5 million as they reduce their ownership to an 18.5 percent stake and senior management kept 3.8 percent. Of the balance, $10.9 million will cover the cost of the offer and $2.8 million will go towards reducing debt, with net debt at about $50 million upon listing.

The company expects to lift net profit to $14.3 million in the 12 months ending March 31, 2015, from $12 million in 2014, with annual sales forecast to rise to $171.9 million from $155.4 million. It expects to pay a dividend of 3.6 cents per share in the 2015 year, implying a cash yield of 2.1 percent.

Metroglass is the seventh company to list on the NZX this year as the local stock market enjoys a flurry of listings, particularly in the growth and tech-space. Last week, ikeGPS Group, which sells a range of portable measuring devices, and Scales Corp, the fruit packager and exporter, debuted on the NZX. Both have fallen below their IPO prices. Last month, Gentrack Group, the utilities and airport software provider, and Serko, the travel booking system company which is also trading below its offer price, debuted. While upcoming listings include Vista Group International, a cinema ticketing and data analytics firm and ERoad, a logistics and fleet management company, in August.

"It is quite a different dynamic to some of the stuff that has listed," said James Lindsay, who helps manage $400 million in equities for Tyndall Investment Management. "They're easier businesses to value, you don't have to hand-on-heart guess where things are going as much. They're clearer businesses to have a defined range about what you would think fair value would be."

The volume of listings was also weighing on retail investors, meaning many of their portfolios were overweight in equities and weakening demand for non-dividend paying, growth stocks, Lindsay said.

The price was set at the lower end of the indicative price range of $1.65 to $1.90, in a front-end book build where institutions set the offer price before retail investors saw the prospectus.

The current owners spent about $40 million over the past three years, including upgrading the company's facilities, and anticipate capital expenditure of about $5 million over the next three to five years, chief executive Neil Rigby said earlier this month. The private equity firms took control of Metroglass in 2012 after its previous owner couldn't manage the debt burden of the company, which took an impairment against goodwill.

After the write-down, the company had an enterprise value of $180 million, less than half the $366.2 million paid by original private equity owner Catalyst Investment Managers in 2006, according to documents released by the Overseas Investment Office  at the time.

The company is dual-listed, with its secondary listing on the ASX.

Forsyth Barr, Macquarie Capital and UBS New Zealand were joint managers and underwriters of the Metroglass offer.

Comments and questions
1

One would hope that there is significant capital growth opportunity in order to compensate for a cash yield of only 2.1%.
It does make me wonder how "the market" prices an enterprise which is anticipated to generate $14.3 million in profits at close to $400 million (if one adds the $50 million of debt to the implied market cap of $323.8 million ??) admittedly not comparing like with like in terms of pre-interest earnings.
If this is what the NZ investor finds acceptable - boy - have I got an IPO for you !!