IVF company float a winner
Market watch top headlines
MELBOURNE, June 11 AAP
June 11 2013, 4:55PM
The Australian share market has finally received some good news after the biggest IPO float so far this year was successful.
And it didn't involve a mining company but a health group, in vitro fertilisation (IVF) provider Virtus.
It is the world's first public listing of a fertility services company and Australia's largest provider, representing more than one-third of IVF cycles.
The stock closed at $6.20, up nine per cent from the $5.68 price it was bought at in the $339 million float.
Its market capitalisation is now close to $500 million.
Its fortunes flowed on to the rest of the healthcare sector, with Ansell up 69 cents, or 3.82 per cent to $18.73, Cochlear gaining 69 cents to $18.73 and Sonic rallying 43 cents to $14.35.
The result is being viewed as an important vote of confidence in the Australian share market and initial public offerings (IPOs) and in a non-resources company.
"The IPO has gone off with a bang, the ASX and market as a whole looks to be ready again for IPOs," IG market strategist Evan Lucas told AAP.
Tuesday's proof that investors with liquidity were out there augured well for other companies considering IPOs, such as TV broadcaster Nine Entertainment, he said.
The environment for IPOs in Australia has been particularly bad for several years, especially for retailers such as David Jones and the disastrous private equity-backed $2 billion listing of retailer Myer in 2009.
There have been 78 IPOs this financial year.
Virtus' public listing also involved a private equity major investor, Quadrant, selling down its entire 46.5 per cent stake, to which it must be paid out.
That creates some risk, preventing Virtus paying off about $149 million in debt but it is profitable, forecasting net profit of close to $27 million this year.
Mr Lucas described Virtus as stable, offering a second-to-none IVF service in Australia.
The purpose of the IPO is to fund growth in Asian countries such as China and India as it is approaching mature, saturation points in Australia, the US and Canada.
Growth is considered a risk, with healthcare in China and India considered difficult markets to crack.
"However it is technology that Australia has managed to generate, taking the health story to the world as much as it can," he said.
"It is good to see ... everybody keeps talking about the non-mining sector picking up and this is the kind kind of company that we need to come about."
By Greg Roberts