IPO performance analysis April 2017 Contents Sections 1 Executive summary 2 2 Profile of IPOs since market reopened in 2013 8 3 IPO performance analysis 12 4 Block trade performance analysis post IPO 18 Appendices A Selection criteria and methodology 20 B List of IPOs included in the analysis 25 Introduction The Australian Private Equity and Venture Capital Association Limited (AVCAL), in conjunction with Rothschild, has analysed the returns of private equity (PE) backed IPOs on the ASX since 2013. This is the fourth annual report published since the re-opening of the IPO market in 2013. The report analyses the share price performance of all PE backed and non-PE backed IPOs listed on the ASX since 2013 with an offer size of at least A$100m. PE backed IPOs have been compared to non-PE backed IPOs and relevant market indices. The share price performance of PE backed IPOs following vendor selldowns has also been analysed. IPO performance has been assessed on both an average basis and a weighted average (by market capitalisation) basis. – The average return analysis assumes an equal dollar investment in each IPO (say A$10,000), consistent with how a retail investor may consider participating in new IPOs – The weighted average returns analysis weights a company’s share price performance by its market capitalisation at the time of IPO. Results for both PE and non-PE IPOs were also compared to an equivalent weighted exposure throughout time in the S&P/ASX Small Industrials Index The selection criteria, methodology and a complete list of the IPOs included in the analysis are contained in the Appendices. 1 1. Executive summary 1. Executive summary 1.1 Key observations PE backed IPO returns have exceeded relevant market benchmarks 1 PE backed IPOs have achieved an average return of 24.3% since the IPO market re-opened in 2013 Over this period, PE backed IPOs have outperformed an equivalent weighted average investment in the S&P/ASX Small Industrials Index 2 More recent PE backed IPOs (2015 / 2016) have achieved an average return of 7.1% PE backed IPOs in 2015 / 2016 have outperformed an equivalent weighted average investment in the S&P/ASX Small Industrials Index 3 It was a more challenging market environment for IPOs in 2016 There were periods of significant market volatility during the year caused by unpredictable political, economic and market related events Total proceeds raised in IPOs of $100m or greater in 2016 was $5.1bn from 14 IPOs, being the lowest level in both value raised and number of IPOs since the market re-opened in 2013 4 Since 2013, almost 50% of PE backed IPOs by number and offer size come from the healthcare and consumer discretionary sectors This contrasts with the non-PE backed IPOs, in which c.50% of IPOs by number and offer size come from the real estate and financials sector 5 There has been a total of 32 PE secondary selldowns across 16 PE backed IPOs that listed since 2013 An average share price return between each selldown date and 31 December 2016 was 1.7% 3 1. Executive summary 1.2 IPO market backdrop 2016 saw a more subdued level of IPO activity relative to prior years IPO activity since 20131 Commentary 18,000 35 Total proceeds raised in IPOs of $100m or greater in 16,544 2016 was $5.1bn from 14 IPOs 16,000 – This was the lowest level in both value raised and 30 number of IPOs since the market re-opened in 2013 14,000 Due to a number of unpredictable political, economic 25 and market related events during the course of 2016, 12,000 the IPO market was closed at various times during the year 20 10,000 – There were periods of significant market volatility, including a fall in the S&P/ASX 200 of 10% in the 8,000 7,735 first 6 weeks of 2016 15 Offer size ($m) Number of IPOs – A number of IPOs were deferred in the second half 5,739 6,000 of the year due to a more challenging market 5,147 10 environment for new issuance 4,000 A total of 5 IPOs were PE backed in 2016 as private 5 equity firms had previously realised a significant 2,000 number of their investments and were focussed on new investment opportunities 0 0 2013 2014 2015 2016 Value raised (A$m) Number of IPOs Notes 1 IPOs of at least $100 million offer size 4 1. Executive summary 1.3 Summary returns for IPOs since 2013 Returns analysis for all IPOs since 2013 Average IPO returns2 Weighted average IPO returns1,2 Number of IPOs S&P/ASX Small Industrials return = 11.6%3 24.3% 13.2% 35 Returns since listing Returns since listing Number of IPOs (All IPOs since 2013) (All IPOs since 2013) since 2013 16.8% 20.4% 46 1 year performance 29.4% 1 year performance 23.2% Number of IPOs 30 (2013, 2014, 2015 (2013, 2014, 2015 trading for at least IPOs) 1 year IPOs) 11.2% 7.4% 37 4.5% 5.8% Number of IPOs 35 1 month performance 1 month performance trading for at least (All IPOs since 2013) (All IPOs since 2013) 1 month 6.0% 7.5% 46 4.4% 5.9% Number of IPOs 35 1 week performance 1 week performance trading for at least (All IPOs since 2013) (All IPOs since 2013) 1 week 5.6% 5.3% 46 0% 10% 20% 30% 0% 10% 20% 30% 0 10 20 30 40 50 PE backed Non-PE backed PE backed Non-PE backed PE backed Non-PE backed Notes 1 Weighted average returns calculated as sum of (absolute returns x IPO market capitalisation for each IPO) / total IPO market capitalisation of PE or non-PE backed sample 2 Share prices as at 31 December 2016 3 Average return of S&P/ASX Small Industrials Index as weighted to PE backed and Non-PE backed IPOs 5 Source: IRESS 1. Executive summary 1.4 Summary returns for 2015 and 2016 IPOs Returns analysis for more recent IPOs Average IPO returns2 Weighted average IPO returns1,2 Number of IPOs S&P/ASX Small Industrials return = 5.6%3 7.1% 10.3% 12 Returns since listing Returns since listing Number of 2015/2016 IPOs 2015/2016 IPOs 2015/2016 IPOs 5.1% 10.5% 20 2.8% 1.3% 5 Returns since listing Returns since listing Number of 2016 IPOs 2016 IPOs 2016 IPOs 10.5% 17.5% 9 10.1% 14.2% 7 Returns since listing Returns since listing Number of 2015 IPOs 2015 IPOs 2015 IPOs 0.6% 0.8% 11 0% 5% 10% 15% 0% 5% 10% 15% 20% 0 5 10 15 20 PE backed Non-PE backed PE backed Non-PE backed PE backed Non-PE backed Notes 1 Weighted average returns calculated as sum of (absolute returns x IPO market capitalisation for each IPO) / total IPO market capitalisation of PE or non-PE backed sample 2 Share prices as at 31 December 2016 6 3 Return of S&P/ASX Small Industrials Index as weighted to all PE backed and non-PE backed IPOs Source IRESS 1. Executive summary 1.5 Post IPO block trade returns for PE backed IPOs Share price returns for investors in PE selldowns have averaged 1.7% Share price returns for investors in PE selldowns (from each selldown date to 31 Dec 2016) 100.0% 83.1% 70.7% 50.0% 30.4% 24.6% 12.6% 12.5% 11.0% Average1 = 1.7% 0.0% (4.1%) (6.9%) (9.5%) (16.3%)(16.3%) (27.7%) (50.0%) (49.5%) (54.6%) (100.0%) (100.0%) Source IRESS Notes 1 Average return of 1.7% across the total of 32 selldowns / block trades from 16 PE backed IPOs 7 2. Profile of IPOs since market reopened in 2013 2. Profile of IPOs since market reopened in 2013 2.1 Number of listings and value of equity raised IPOs with an offer size of at least A$100m since 2013 Number of IPOs Value of equity raised (A$m) There have been 81 IPOs with an offer 81 size of at least 35,165 A$100m since 2013, comprising 35 PE backed IPOs and 46 46 20,890 non-PE backed IPOs 35 14,275 Over A$35bn in equity raised at IPO PE backed Non-PE backed Total number of IPOs PE backed Non-PE backed Total equity raised since 2013, with c.40% from PE backed IPOs The data sample PE backed PE backed equates to average 41% 43% IPO offer sizes of: Non-PE ~A$454m for PE backed Non-PE 57% backed backed 59% ~A$408m for non- PE backed 9 2. Profile of IPOs since market reopened in 2013 2.2 Industry sector composition – by # IPOs Healthcare and Consumer sectors represent 59% of PE backed IPOs while Financials and Consumer sectors represent 58% of non-PE backed IPOs Consumer and PE backed IPOs Non-PE backed IPOs All IPOs Health Care IPOs + = Telecom Financials have dominated the Financials Financials 3% 14% 12% 15% Real Estate PE backed dataset IT 19% since 2013 14% Industrials Real Estate Industrials 9% 33% Telecom Industrials 10% 11% 2% Real Estate, IT Consumer and Health Care 17% 7% Financials IPOs led Telecom Consumer Health Care Consumer Discretionary non-PE backed IPOs Consumer 2% Discretionary 10% 23% by number Discretionary Health Care 18% Consumer 31% 4% Consumer Consumer Utilities Staples Staples Energy Utilities Materials Staples Materials 4% 9% Energy Materials 11% 2% 3% 3% 7% 2% 1% 2% Sector # of IPOs Sector # of IPOs Sector # of IPOs Financials 4 Financials 7 Financials 11 Industrials 3 Industrials 5 Industrials 8 Consumer Discretionary 11 Consumer Discretionary 8 Consumer Discretionary 19 Utilities 0 Utilities 2 Utilities 2 Materials 1 Materials 1 Materials 2 Energy 0 Energy 1 Energy 1 Consumer Staples 4 Consumer Staples 3 Consumer Staples 7 Health Care 2 Health Care 8 Source IRESS Health Care 6 IT 5 IT 1 IT 6 Notes Telecom 1 Telecom 1 Telecom 2 1 GICS Sector has been used to classify industry groups Real Estate 0 Real Estate 15 Real Estate 15 2 Real Estate has been split out Total 35 Total 46 Total 81 of the Financials sector using the GICS Industry Group Classification 10 2.