IPO Report - Q2 2017 FY

Initial Public OfferingsAustralian Mid-market Activity Q2, 2017Financial Year

The focus of the analysis is on the current quarter and the immediately preceding 12 months with the aim of

providing you with an overview of the current mid-market IPO activity.

In our analysis we have looked at IPOs that had an enterprise value of less than $200m at the time of listing.

We have also provided some further detail on the cost of IPOs broken down by market capitalisation and the

performance of IPOs occurring in the last twelve months by significant sectors.

Key highlights are:

■ There were 29 IPOs for mid-market companies in the quarter, the most in the last five years

■ Information technology, continues to be the most active sector with 7 IPOs in the quarter and mining

related was the second most active sector with 6 IPOs in the quarter

■ The financials sector showed a significant increase in activity recording 5 IPOs in the quarter. Prior to this

period the sector had only recorded 2 IPOs in the previous 12 months.

■ Mid-market companies raised $439m on the ASX in the quarter; the highest since Q2 2015

■ The average IPO fundraising was $15.1m which is a 37% decrease on the previous quarter and 17%

decrease compared to the average of $18.2m over the last 12 months

■ On average transaction costs (excluding brokerage fees) decreased by 23% to $234,411

We are happy to present our quarterly review of the mid-market IPOs on the ASX

Introduction

Initial Public Offerings Review - Q2, 2017 Financial Year2

Number of IPOs and funds raised by quarter

The number of IPOs increased by 15% for the 12 month

period. Historically the second quarter of the financial year

has been the most active quarter and this quarter has been

the most active quarter over the last 4 and a half years

The total funds raised of $439m is higher than the prior

quarter and the each quarter in the last year. The average

fundraising at $15.1m was 37% lower than the prior

quarter and 17% lower than last 12 months average.

The average enterprise value at IPO in the quarter was

$52.5m which is down from $57.6m in the previous quarter

and down from last year’s average in the same period of

$62.7m.

There were 29 IPOs in the mid-market this quarter, which is a 61% increase from last quarter and 45% increase compared to the same quarter last year.

Overview

60

50

40

30

20

10

0

$700.0m

$600.0m

$500.0m

$400.0m

$300.0m

$200.0m

$100.0m

-Q1 Q2 Q3

2015

Q4 Q1 Q2 Q3

2016

Q4

Source: S&P Capital IQ and Nexia analysis

Number of IPOs (LHS) Funds raised (RHS)

Q1

2017

Q2

Initial Public Offerings Review - Q2, 2017 Financial Year 3

Quarterly Activity

Of the 29 IPOs in the quarter, the information technology, mining related and financials were the most active sectors with 7,6 and 5 IPOs respectively occurring in each sector. Of the $439m raised in the quarter, $137.1m was raised in the financials sector the majority of which was from the Watermark Global Leaders Fund Limited IPO.

The following funds were raised by sector in the quarter:

Industrials

Information Technology

Consumer Discretionary

Mining Related

Financials


$57.5m

Other $47.0m

Financials$137.1m


$60.9m

Mining Related$77.6m

Industrials $35.2m



Company Name Industry Sector Industry Industry Primary Gross Proceeds

EV IPO

Midway Limited Materials Paper and Forest Products

Paper and allied products $37,000,000 $196,000,000

Broo Limited Consumer Staples Beverages Malt beverages $170,000,000

Murray River Organics Group Limited

Consumer Staples Food Products Canned, frozen, and preserved fruits, vegetables, and food specialties

$35,000,000 $135,000,000

Boyuan Holdings Limited Real Estate Real Estate Management and Development

Subdividers and developers $19,000,000 $99,000,000

VEEM Ltd. Industrials Machinery Construction, mining, and materials handling machinery and equipment

$25,000,000 $93,000,000

Freedom Insurance Group Ltd.

Financials Insurance Life insurance $15,000,000 $93,000,000

Watermark Global Leaders Fund Limited

Financials Capital Markets Investors $91,000,000 $91,000,000

Dreamscape Networks Limited

Information Technology Internet Software and Services

Computer programming, data processing, and other computer related services

$25,000,000 $74,000,000

Axsesstoday Limited Financials Consumer Finance Miscellaneous business credit institutions

$10,000,000 $58,000,000

CFOAM Limited Materials Chemicals $9,000,000 $57,000,000

Automotive Solutions Group Ltd

Consumer Discretionary Auto Components Motor vehicle parts and accessories

$31,000,000 $47,000,000

Horizon Gold Limited Materials Metals and Mining Gold and silver ores $15,000,000 $42,000,000

Mayfield Childcare Limited

Consumer Discretionary Diversified Consumer Services

Child day care services $24,000,000 $40,000,000

Litigation Capital Management Limited

Financials Diversified Financial Services

Miscellaneous business credit institutions

$15,000,000 $40,000,000

DomaCom Limited Financials Capital Markets Security and commodity brokers, dealers, exchanges, and services

$6,000,000 $40,000,000

Sensera Limited Information Technology Semiconductors and Semiconductor Equipment

0 $10,000,000 $39,000,000

Getswift Limited Information Technology Software Prepackaged software $5,000,000 $37,000,000

Faster Enterprises Ltd Real Estate Real Estate Management and Development

0 $5,000,000 $34,000,000

Powerhouse Ventures Limited

Industrials Professional Services Engineering, accounting, research, management, and related services

$10,000,000 $26,000,000

Kalium Lakes Limited Materials Chemicals Mining and quarrying of nonmetallic minerals, except fuels

$6,000,000 $26,000,000

Neurotech International Limited

Healthcare Healthcare Equipment and Supplies

Electromedical equipment $7,000,000 $25,000,000

OpenDNA Limited Information Technology Internet Software and Services

Information retrieval services $10,000,000 $17,000,000

Creso Pharma Limited Healthcare Pharmaceuticals $5,000,000 $17,000,000

Gooroo Ventures Limited

Information Technology Internet Software and Services

$5,000,000 $17,000,000

Bod Australia Limited Consumer Discretionary Distributors $6,000,000 $14,000,000

HearMeOut Ltd. Information Technology Software $7,000,000 $13,000,000

Great Boulder Resources Limited

Materials Metals and Mining $6,000,000 $11,000,000

Dragontail Systems, LTD. Information Technology Software Prepackaged software $6,000,000 $7,000,000

Technology Metals Australia Limited

Materials Metals and Mining $4,000,000 $5,000,000


Movement in market capital since IPO by industry (Past 12 months IPOs: low, high and average)

350%

300%

250%

200%

150%

100%

50%

0%

-50.0%

-100.0%

Financials Consumer Discretionary

Mining Related


Other Industrials

To get a better representation of the activity in each sector we have analysed the number of IPOs and average fund raising per sector over the last 12 months.

The Information Technology sector continues to be the most active sector in the market over the last year. This sector has recorded an IPO in each quarter since the start of FY2015 and has often been the most active sector in each of these quarters.



Sectors

The spread in market capitalisation is quite wide across all industries for mid-market IPOs in the last year. The consumer discretionary sector was the least volatile while industrials and other were the most volatile in respect of the range of returns.

Industrial related IPOs were the best performing over the last 12 months with an average return of 40.5%. The average return however is significantly influenced by Aurora Labs Limited who’s market cap has increased by 327% since listing in August 2016 from $38.5m to $164.5m.

Financials and consumer discretionary were the worst performing on average with a decrease in average market capitalisation from IPO of 6.9% and 6.1% respectively.

Performance over the last 12 months

Number and average fundraising by sector (last 12 months)

Num

ber o

f IPO

s

201816141210

86420

$0m $10m $20m $30m $40m

Financials

Healthcare

Industrials

Mining Related



Other


Methodology

The analysis was prepared based on data sourced from S&P Capital IQ. Data analysed is for completed IPOs on the ASX, from 1 July 2014 to 30 September 2016, with an implied enterprise value of less than $200m. If no implied enterprise value was disclosed at the IPO filling date, transactions were adjusted to be the first enterprise value disclosed within the preceding 90 days. In the 17 occurrences where no enterprise value was disclosed during this period, it was calculated by adding total debt at the filing date to the number of shares offered multiplied by the offer price. Of the 17 occurrences that were manually adjusted there were 10 instances where the value was not within 25% of the market capitalisation at the IPO date.

Movement in market capital since IPO by industry (Past 12 months IPOs: low, high and average)

Certain costs in undertaking an IPO, being accounting and legal costs, are typically fixed regardless of the outcome.

Fundraising costs, on the other hand, are generally paid on successful completion of the IPO and represent a percentage of proceeds raised. Accordingly, fundraising costs have been excluded from our analysis.

A number of factors will impact the costs incurred, including how prepared the company is for the IPO, the complexity of its business and whether there are any related transactions. Over the last year, the fixed costs for an IPO have averaged $268,545 compared to $332,055 for the corresponding period in the prior year.

The peak in transaction costs for companies with a market cap at listing of $75-$150m is the result of Frontier Digital Ventures Limited’s IPO in the September 2015. This IPO recorded legal costs of $1.0m which is significantly above the average legal fees for this size entity in the last 12 months of $405,000.

Costs

Transaction costs by market capital size

$1.6m

$1.4m

$1.2m

$1.0m

$0.8m

$0.6m

$0.4m

$0.2m

-$0 - $10m $10 - $75m $75 - $150m $150m - $200m

Market capital at listing


$63k$190k

$394k$511k

Of the 131 transactions analysed there was sufficient data for 42% of the transactions to calculate the average accounting fees per transaction and there was sufficient data for 86% of the transactions to calculate the average legal fees per transaction.

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