Metro debut seen as promising

TIM HUNTER
Last updated 05:00 31/07/2014

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Investors have given a cautious welcome to the positive NZX debut of Metro Performance Glass after its shares rose 6 cents on their first day of trading.

"It's a good start," said Brian Gaynor of Milford Funds Management, whose funds disclosed a stake of 5.1 per cent yesterday.

"But the first day is immaterial. The next six to nine months is important."

Paul Glass of Devon Funds, also a buyer in Metro's initial public share offer, said first-day movements tended to be driven by market sentiment, but Metro's listing was encouraging.

"More important for us is will it be up in the next one or two years."

While some other initial public offerings (IPOs) had not performed well after listing, Metro "shows the market is still open for IPOs that are sensibly priced".

Shares in Metro listed yesterday morning after a $244 million initial public share offer was completed this week.

The stock opened at $1.75 on a healthy level of bids and offers, up 5c on the offer price.

The Auckland-based company, which produces glass for homes and commercial buildings, was floated by its private equity owners at $1.70 a share, valuing it at $315m.

Most of the stock in the IPO, about $200m worth, was bought by institutions. The remainder went to retail investors and staff.

The existing shareholders, mainly private equity firm Crescent Capital, have retained a 22 per cent stake.

Metro is the biggest IPO to list this year since the float of Genesis Energy in mid-April.

At an event to mark the company's debut, chief executive Nigel Rigby paid tribute to its previous owners, who had bought in at a difficult time.

"Private equity gets a tough rap but these guys have been excellent shareholders."

Management's job was now to deliver in prospectus forecasts, he said.

Matt Goodson of Salt Funds Management, also a buyer of Metro stock in the IPO, said the business was in a much healthier position than when Crescent acquired it in January 2012 for $181.5m.

"They've built themselves an attractive market position."

But its future earnings would be dominated by the cyclical performance of the building industry, Goodson said.

Building consent figures out yesterday showed the number of dwelling consents at the highest level since August 2007.

Figures from Statistics New Zealand revealed $1.3 billion of building work was consented in June, mostly in Christchurch and Auckland.

Gaynor said that boded well for Metro, whose glazing products tended to be supplied towards the end of the construction process.

"They'll hope they hitch a ride on the building upturn. If they do the share price will perform well. If they don't it won't."

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He said Metro was likely to be included in the NZX 50 index, which meant many fund managers would have to buy its shares.

The index composition is reviewed on the first Friday of each quarter, with new listings eligible for fast-track inclusion if they would rank higher than 25th.

- The Dominion Post

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