NZX benefits from flurry of activity as companies seek cash, growth

Friday, 20 November 2020

NZX chief executive Mark Peterson (second from right) welcomed Harmoney to the bourse this week.

NZX, which operates the New Zealand stock exchange, is benefiting from a flurry of activity as companies go cap in hand to investors to raise cash to shore up their finances and continue to grow amid disruptions caused by the coronavirus pandemic.

Shares in NZX, which trade on its own market, hit a record high of $1.92 this month as investors bet the increase in activity would flow through to the company’s profits.

In the half year to June 30, NZX’s profit jumped 41 per cent to $9.1 million, and the company signalled in August that it may near the top end of its forecast for full-year operating profit of between $30m to $33.5m, compared with $31.4m last year.

In the early stages of the pandemic, listed companies called on their shareholders for extra money, with nearly $6 billion of capital raised in the first half of 2020 by a broad range of businesses, from a $1.2b raising by Auckland International Airport to just $1m sought by software company Enprise.

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Listed companies have turned to their shareholders for cash during the coronavirus pandemic.

“The world has changed over the course of 2020. This need to have access to capital is more alive to people than ever before,” said NZX chief executive Mark Peterson.

“We have had some uncertain times through the course of this year, and we are not out of the woods yet. Boards and management teams of firms are really thinking hard about how they protect their businesses and grow their businesses, and access to capital is key.”

The total value of capital raised to the end of October lifted 0.2 per cent to $13.8b. Some $8.9b of that was secondary equity capital, mostly to address the impacts of Covid-19, with a value 32 per cent higher than at the same time last year. The balance of $4.8b was new retail and wholesale debt listings.

Volatility kept debt issuance on the sidelines for the first half of the year, but Wellington International Airport broke the drought in August with a retail bond offer, which helped put a stake in the sand for pricing and allowed debt to take off in the second half of the year, Peterson said.

NZX had its first new equity listing for the year on March 31, when supplement and skincare company Me Today raised $1.5m and took over the shell company CSM Group. The meeting to approve the transaction had to be moved online at the last minute due to the pandemic.

Listings have picked up in the second half of the year, with cannabis company Rua Bioscience’s $20m initial public offering last month and online lender Harmoney joining the bourse this week after raising A$92.5m ($97.7m) in a dual listing on the Australian Securities Exchange.

Last year, two companies listed on the NZX, Napier Port Holdings in August and medicinal cannabis company Cannasouth in July. There were no listings in 2018 and just one, Oceania Healthcare, in 2017.

Peterson said there might be a few more equity listings between now and Christmas.

In the wings is the potential listing of New Zealand Rural Land Company in December, which has said it may seek $150m to buy dairy farms.

“Hopefully we will end up with a bit of a tail wind,” Peterson said. “It's representative of the need for capital, the ambition that these businesses have, the confidence they have, and the fact that they can convince the investors to back them.

“It doesn't surprise me. It's good that the market is there to support the growth opportunities.”

The trend may continue into next year, with telecommunications company Vocus announcing this week that it plans to sell the company through an initial public offering by the end of 2021.

“We see 2021 as positive for the market,” Peterson said.

“You don't want to predict too far in the future. But certainly the conversations are good, the team is really busy, and the advisory community is really busy with prospects. We are all just hoping that these things will land, but so far it feels like 2021 could be a good year.”

NZX shares lifted 0.6 per cent to $1.82 in late afternoon trading on Friday, and have gained 39 per cent this year.