Stocks rose sharply during FED week as solid U.S. earnings and economic data outweighed uncertainty over the course of European debt. The key IPOX Indexes outperformed the benchmarks, indicating increased risk appetite. Broad range of global IPOs lined up - Japanese gamer in Hong Kong!
· Key IPOX Indexes outpace benchmarks, select mid-caps plunge after earnings: The IPOX Global 50 (IPGL50), key gauge for the performance of the largest and most successful global IPOs and spin-offs over the past four years, rose +1.71% to +9.65% YTD on the week, outpacing benchmark MSCI World (MXWD) by +89 bps. After three weeks of lackluster performance, the rebound indicates a clear return of risk appetite. The relative strength extended across the key IPOX Regional universe: In the United States (IPXO, IPXT), e.g., the IPOX U.S. 30 (IPXT) rose +1.10% to +15.03%% YTD, beating the S&P 500 (SPX) by +61bps. A bounce in beleaguered General Motors (GM: +1.88%) and Warren Buffett pick Phillips 66 (PSX: +8.63%) drove strong relative gains. Data analytics company Verisk (VRSK: -6.84%) declined on profit taking. Recent U.S. small and mid-caps remained volatile with the performance of the broad IPOX U.S. 100 (IPXO: +0.39%) dragged by big declines in 3/12 IPO Industrial Rexnord (RXN: -21.30%). The IPOX Europe universe (IPXUJPEU, IXTE) continued to trade higher as Spanish Financial Bankia (BKIA SM: +32.76%) surged and Spanish travel reservations processor Amadeus IT Holdings (AMS SM: +4.40%) hit a new post-IPO high. Developed Asia-Pacific (IPTA) recorded strong absolute and relative gains on the week. The IPOX Asia-Pacific 30 (IPTA) rose +2.03% to +12.41% YTD, strongly outpacing benchmark MSCI Asia-Pacific (MXPC). Ahead of the H.K. listing of Japan gambling hall operator Dynam Japan (6889 HK), returns were driven by a strong week in the Macau casinos, including Sands China (1928 HK: +7.76%), consumer staples Biostime (1112 HK: 7.38%) and Calbee (2229 JT: +6.65%). Cosmetics maker L'Occitaine (973 HK: -8.01%) and Japanese Financial heavyweight Dai-Ichi Life (8750 JP: -4.06%) fell against the trend. IPOX China (CNI) lagged anew on a big fall in industrial China Rhongsheng (1101 HK: -24.29%) on weak corporate results.
Most significant IPOs traded (Week 07/27/12):
|Company||Ticker||Return / IPO (%)|
|Calibre Group Ltd||CGH AU||-12.27|
|Eloqua Inc||ELOQ US||30.00|
|Globus Medical Inc||GMED US||12.50|
16 global IPOs commenced trading last week with the average (median) IPO gaining 8.75% (1.24%). Focus remained on the solid debut of U.S. deals, such as specialty software maker Eloqua (ELOQ US: +30.00%).
· The Week ahead - Japanese Gaming in H.K. :
|Bloomin' Brands Inc||BLMN US||U.S.||DB, GS, JPM|
|CKE Inc||CK US||U.S.||BCLY, CITI|
|Dynam Japan||6889 HK||Japan||CITICH|
|Manchester United||MANU US||U.K.||BAML, CS|
|Peregrine Semi||PSMI US||U.S.||JP Morgan|
|Performant Financial||PFMT US||U.S.||CS, GS, WFS|
|Stemline Therapeut.||STML US||U.S.||JMP, OPP|
A number of key deals are lined up: Japan domiciled gaming company Dynam Japan Holdings (6889 HK) is a leading operator of Pachinko halls in Japan and joins the H.K. casino/gaming complex, including SJM Holdings (880 HK), Wynn Macau (1128 HK), MGM China (2282 HK) or Sands China (1928 HK). Pachinko is one of the most popular forms of entertainment in Japan, accounting for approximately 28.6% of Japan's USDbn 248.2 entertainment market in 2010. The company seeks to raise USDm 202 for a 15.08% stake at 0.61 times 2011 revenues. Having experienced no growth over the past years, proceeds are earmarked for growing the company in the Japanese market. It expects 50% of consolidated profit to be paid out in form of dividends, making it attractive for investors seeking to diversify away from the high-risk Macau-domiciled casino complex. Manchester United (MANU US) announced a big GM sponsorship - costing GM's marketing chief his job - to boost its IPO prospects. With no proceeds going to grow the club, the prospectus still dubs the low float IPO an "emerging growth company", seeking a valuation of around 10 times 2011 revenues, in line with some of the fast growing recent Silicon Valley tech IPOs. More U.S. restaurant IPOs - all P/E exists with no proceeds going to the firm - include Blooming Brands (BLMN US) and CKE Inc. (CK US), operator of CA Carl's Jr. burger chain, as well as management services provider Performant Financial (PFMT US), another P/E exit. Solid U.S. markets and increasing average risk appetite should support the pricing environment for these deals.
|Ticker (BBG/Reuters)||Week||Q2 12||YTD 12|
|IPOX Global 50||+1.71%||-8.13%||+9.65%|
|IPOX U.S. 100||+0.39%||-5.23%||+14.42%|
|IPOX U.S. 30||+1.10%||-3.67%||+15.03%|
|IPOX Asia-Pacific 30||+2.03%||-5.69%||+12.41%|
|IPOX China 20||+1.70%||-8.97%||-4.30%|
|Hang Seng Enprs.||+2.79%||-10.12%||-2.77%|
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.