Kiwi investors can expect a strong pipeline of initial public offerings from New Zealand and Australian companies listing in coming months to take advantage of the rising market, says Nikko Asset Management head of equities Stu Williams.
But he warns investors should be sceptical about why some Australian offers are being brought to this market, given its relative small size.
The New Zealand market has been performing well at unprecedented levels with the benchmark NZX50 Index up 5.2 percent in the first quarter of the year.
Williams said he still expected good growth this year although at slightly lower levels than last year. There was a flurry of 12 main board IPOs in 2014 - the NZX's biggest in a decade, and four compliance listings on the NZAX market that didn't raise any cash.
He wouldn't discuss one listing about to come to market after signing a confidentiality agreement with the company other than to say it was "very interesting" and had good management and market position.
There is already quite a long list of potential floats named this year. One that has already been announced is Melbourne-based accounting software company MYOB which hopes to finalise its listing price on the ASX by the end of this month. The company, which competes against Xero in New Zealand and Australia, hopes to raise up to A$830 million in the float.
What could be the biggest IPO of the year is Carter Holt Harvey, which Graeme Hart, New Zealand's richest man, is said to be planning to float soon. It's expected Hart's Rank Group will retain a cornerstone stake in the building supplies and timber products business and look to raise as much as $1 billion.
Queensland-based Kern Group, which was behind last year's $132 million float of childcare centre roll up Evolve, is understood to be considering a similar IPO roll up in the property market. Another two IPOs being touted are Auckland-based insurance firm CBL and life insurer Partners Life. CBL raised A$55 million in a secured offer late last year and is now assessing its options for an IPO in the next couple of months while Partners Life raised $31.6 million last year to fund its next phase of growth and said it was a precursor to a NZX listing within in the next two years.
Powerhouse Ventures, one of the three new technology business incubators part-funded by the government, says it is on track to raise about $40 million in an IPO on the main board later this year to raise capital for growth.
The new NXT market is also expected to have its first listing by June.
Williams said in Nikko's case its funds were already fully invested so any IPO has to be more palatable than its existing assets and a lot of that came down to pricing.
"At the end of last year there were some extreme multiples well in excess of what could be justified and sustained from established businesses," he said.
While Williams said his team pick stocks on an individual company rather than sectoral basis, its funds are overweight in utilities, the retirement sector and companies with good global growth prospects, particularly with US earnings, and are underweight in banks, listed property, and large cap stocks.
It looked for companies with sustainable earnings - pointing to Japara Healthcare as one example. It debuted as the first Australian aged care provider to list on the ASX last year and its shares jumped 35 per cent on day one from the A$2 listing price and are now trading at A$2.62. Williams said the stock has an expected 12-month total shareholder return of 33.2 percent compared to the 5.4 percent on the NXZ 50 or 6.2 percent on the S&P/ASX 200 Index.