Big jump in Synlait shares
The share price of Canterbury milk processor Synlait Milk has soared in early trading on the NZX today.
At the start of trading the company's shares lifted from the set offer price of $2.20 to $2.62, hit a high of $2.73 and pulled back to $2.65.
Shares in the dairy company were priced at the halfway point of its indicative $2.05 to $2.65 range given a few weeks ago.
The debut of the company on the NZX followed an IPO that raised $75 million of new shares and onsold $38.7m of existing shares.
Synlait Milk managing director and co-founder John Penno said he was pleased with the outcome.
The upward movement of the share price on day one was good, but the company was focused on long-term growth, he said.
Synlait was ready to become a public company, Penno said.
"This is very much a next step for the company."
The $75m of new cash raised will be used to repay debt and contribute to Synlait's planned $183m of growth initiatives over the next two years.
It already has resource consent for a $15.1m lactoferrin extraction and purification facility, a $27m blending and consumer packaging plant and $11.8m dry store.
It is preparing to apply for consents for a third dryer, costing $110m, for its Dunsandel processing plant, 40 kilometres south of Christchurch.
Synlait's prospectus said it expected to complete the new facilities in 2015, with the benefits coming through in the financial year ending July 2017.
The Canterbury-based company supplies specialised higher value dairy ingredients to milk-based health and nutrition companies internationally.
The board has signalled it would not pay dividends in the 2013/14 financial year but might start doing so at some point after that although it remained "growth-based", Penno said.
First NZ Capital head of institutional equities James Lee said he expected there to be good trading for Synlait Milk on day one.
"It's a very popular sector. Everyone understands dairy in New Zealand."
The buy in of a 7.5 per cent stake by Dutch dairy giant Royal FrieslandCampina, an existing Synlait customer, was seen by markets as validation of the dairy company's growth strategy, he said.
Penno said FrieslandCampina's interest was probably the reason for such a strong share price in this morning's trading.
Milford Asset Management fund manager Brian Gaynor said institutional shareholders, including KiwiSaver institutions, would be lining up to buy shares today.
This was one of the stronger listings, with high demand for shares, he said.
The Synlait Milk listing was the first real exposure New Zealand investors had to the agricultural sector, Gaynor said.
"Dairy is a very hot area at the moment."
Ordinary "mum and dad" investors would not buy stocks today, but they would be interested in securing shares down the track, he said.
Synlait Milk's No 1 shareholder is China's Bright Dairy, which held a 51 per cent stake after injecting $82m of capital in 2010 until the IPO. It now holds 39.1 per cent after the selldown, but retains its status as controlling shareholder after a waiver from the NZX.
Neither Bright Dairy nor Japanese investor Mitsui plans to sell their shares.
NZX chief executive Tim Bennett said while the Synlait listing was heavily oversubscribed, mum and dad investors could still get a portion of the company, and a lot did via their KiwiSaver investments.
There was strong domestic and offshore demand for shares in the agricultural sector, he said.
"People see it, and rightly so, as investing in the future growth of our economy."
Synlait Milk was the latest in the run of Kiwi companies to list on the NZX, including the Mad Butcher, Moa beer, SLI Systems and Mighty River Power.
"We've had a very strong run of IPOs this year and the pipeline looks good," Bennett said.
Former Kiwibank chief executive Sam Knowles has been appointed as a director of Synlait Milk along with Fletcher Building chief financial officer Bill Roest and chairman Graeme Milne.
Milne said Knowles' experience in growing Kiwibank would be valuable to Synlait as it implemented its growth initiatives.
Knowles was also a director of NZX-listed companies SLI Systems and Trustpower, and chairman of accountancy services provider Xero.
The independent directors would complement the directors nominated by the company's cornerstone shareholder, Bright Dairy, Milne said.
These were Bright Dairy's vice-president Ke Li, chief financial officer Zongbo Dong, director of strategy and research Sihang Yang, and Ruth Richardson who would be the New Zealand resident Bright Dairy-appointed director in accordance with the company's constitution.