The listing of two new companies on the JSE this week put dealers in the mood for making money, Jacques Magliolo
Investors received a double treat at the Johannesburg Stock Exchange (JSE) this week as two new company listings took place, bringing to an end weeks of lacklustre market performance.
The listing of ChromeCorp Holdings Limited under the main board Steel & Allied sector and Bell Equipment Limited under the Engineering sector revived both investor and dealer interest in the market and was hailed as a resounding success for the JSE, offsetting recent detractors’ comments that the market is overbought, expensive and headed for a crash.
Rustenburg-based ferrochrome producer ChromeCorp listed amid guttural animal screams from dealers as they fought to buy the new counter. The pre-listing price of 500 cents came on to the market at 725 cents a share, but immediately climbed to a high of 850 cents. Not surprisingly, stags — investors who buy shares before a listing with the express aim of selling them at a profit on the day of listing — came into the market at this point, causing ChromeCorp’s share to close at 750 cents.
Says Barry Miller, dealer at EW Balderson: “Even at this price it offers the long-boys (dealers who buy shares for the long term) optimism that the share will do well over the next few years.” Long-term interest in ChromeCorp is linked to the company being one of the three major ferrochrome producers in South Africa, along with Samancor and CMI.
A phenomenal 1,6-million shares traded on the day, an average of nearly 4 000 shares per deal, worth more than R12-million. Prior to the listing the three million shares offered to the public were 26,4 times subscribed.
ChromeCorp chairman John Vorster said: “While we are delighted at the interest shown by the public in our company, we realise that part of the reason for the over-subscription, was the small number of shares on offer.
“As we have already received strong backing from 30 major institutions in the private placing, we wished to attract the smaller investor for the public offer,” he says.
To satisfy these investors, ChromeCorp has said that everyone who subscribed for up to 300 shares will receive their full allocation. Thereafter, shares will be issued on the basis of the size of individual applications.
By midweek, dealers were in a money-making mood. However, their reaction to the listing of Bell Equipment seemed, on the surface, more subdued. Miller explains: “With ChromeCorp, dealers did not seem to know what the upside of the share was, but with Bell they know what they want and at what price.” He said such a share is called a “stable counter, but with long-term upside”.
Analysts provide two reasons for this long-term interest. Firstly, Bell’s financial profile is sound. Its pre-listing statement shows that income over the past five years has grown by nearly 51 percent to R25,2-million from R16,7-million. Turnover was even more impressive, climbing by 94 percent to R515,21-million last year.
Secondly, with off-shore sales accounting for about half of turnover, with manufacturing operations diversified between Richards Bay, New Zealand and Mauritius and with more than 12 000 machines operating in 61 countries, Bell should reliably provide investors with a strong rand hedge.