You could say it wasn’t the best timing to produce what could be our biggest IPO this year.
After the sharpest fall market in years, you’d think floating a multi-billion dollar offering of shares would be a risk perhaps even too large for Macquarie Bank, for the time being.
But that’s what Macquarie did yesterday with the proposed float of Boart Longyear Ltd, a mining drilling services company partly-owned by the bank.
The long awaited float was revealed as the market chopped around before finishing unsettled and in the red.
Market estimates are for as much as $2.65 billion from the float and already a number of big investors are interested.
Argo Investments CEO, Rob Patterson nominated Boart as one of the stocks his company would be interested in when announcing a $441 million issue to shareholders with the annual results last month.
Argo likes Macquarie: its biggest holding is MBL shares.
But the company is right in a sector that Australia has probably world class strength: servicing the rapidly growing resources sector.
Just look at the cast of companies operating: Orica, Dyno Nobel, Campbell Bros, Downer, United Group, Transfield Services, Leighton, Worleyparsons, Mincom, and a host of smaller groups such as Walter.
Boart is offering shares at between $1.76 to $2.10 a share, which could raise between $2.25 billion to $2.7 billion.
In a statement the company said that global budgets for metal exploration, excluding iron ore, surged 45 per cent last year to a record $7.1 billion, according to Canada’s Metals Economics Group. Miners, led by BHP Billiton, Rio Tinto and others are spending billions of dollars on local projects in Australia.
The continued strength of spending by the mining sector was confirmed in yesterday’s December quarter capex figures from the Australian Bureau of Statistics.
The company could have a market value of between $2.61 billion and $3.12 billion, the statement said.
Advent International, a private equity firm, and its investment partner, Bain Capital, acquired Boart Longyear from Anglo-American PLC in July 2005. Macquarie Bank joined as a shareholder in the middle of last year.
Boart, which has a corporate office in Sydney, has over 100 years’ industry experience and operates in about 30 countries worldwide and distributes its manufactured products to over 100 countries.
The drilling services contractor is forecast to generate pro forma revenue of about $US1.46 billion ($A1.86 billion) and earnings before interest, tax, depreciation and amortisation (EBITDA) of $US320 million ($A406.68 million) for the 2007 calendar year.
Over the last two years Boart has moved the operational head office from Johannesburg, South Africa, to Salt Lake City, United States, rationalised 14 production facilities to 11 and implemented initiatives such as global account management and a centralised sourcing strategy,” according to the company’s website.
Around a quarter or more of the company’s revenue comes from Asia Pacific with Australia the most significant country within the region.
The retail offer will open to Australian and New Zealand investors on March 12 and will close on March 28.
The institutional offer will be made via a bookbuild and is scheduled to open on April 2 and close on April 3.
…
Like its larger peers, Qantas and Virgin Blue, Regional Express has managed to boost first half earnings on the back of tight cost controls and better fuel costs.
Unlike the big two though Rex has had an extra negative to surmount: the impact of the drought in much of the regions it flies to and from each day.
But first half earnings rose almost 24 per cent in the December half and are holding to an earlier forecast of a 20 per cent improvement in earnings for the full year to June.
The airline said net profit reached $11.5 million, up 23.7 per cent from $9.3 million earned in the first half of 2006.
“While the current operating environment remains challenging, Rex maintains its group net profit forecast of a 20 per cent growth for this full financial year over the previous period,” executive chairman Lim Kim Hai said in a statement accompanying the profit announcement.
Group revenue in the half jumped 20.4 per cent to $104.4 million, on a 20.6 per cent gain in the number of passengers carried, to 704,000.
Mr Lim said Rex had continued to improve earning despite the worsening drought conditions affecting much of regional Australia and continued high fuel expenses. Rex’s fuel costs were up 30 per cent over the prior corresponding period.
In comparison with the first half of FY 2006, Rex said the highlights included:
· Group revenue increased by 20.4% to $104.4m
· Passengers carried increased by 20.6% to 704,000
· Capacity (Available Seat per Kilometre) grew 13.6% to 384m
· Group profit after tax increased by 23.7% from $9.3m to $11.5m
· Net return on average total assets was 21.7%
· Cash holdings were $20m with no long term debts
“While the drought has had a major impact on families and businesses in many rural communities, the underlying strength and the diverse nature of Rex’s own network and activity has lessened considerably the impact,” Mr Lim said.
“Rex is continuing to work closely in partnership with the local communities we serve to bring the benefits of a quality service at very affordable fares. This approach of co-investment has resulted in more frequent services at lower fares to the benefit of the councils, its constituents and Rex.
“An example of the partnership approach has been the agreements between Rex and the communities of Grafton and Taree which were left without air services following the withdrawal of an operator in December 2006. Rex has stepped up to the plate and has commenced a new, vastly improved service from 25 February 2007.”
