Yield set to float investors’ boats

Trade buyers that were competing for the Dalrymple Bay Coal Terminal are believed to be considering an acquisition of a cornerstone stake in the Queensland-based infrastructure asset. Picture: Daryl Wright.

Trade buyers that were competing for the Dalrymple Bay Coal Terminal are believed to be considering an acquisition of a cornerstone stake in the Queensland-based infrastructure asset as part of its initial public offering in the coming months.

As reported by this column just days ago, the IPO plans for the Brookfield-owned asset are gathering steam, with analysts scheduled to be briefed on the $2bn-plus terminal by the private equity firm and its advisers in the coming weeks.

When a trade sale process was run for the terminal by Bank of America last year, groups understood to be lining up included Cheung Kong Infrastructure, based in Hong Kong, and Global Infrastructure Partners, fronting a fund in which the National Pension Service Fund out of South Korea was a major investor.

Brookfield’s hope is to embark on an IPO by the end of the year, with Citi and Credit Suisse also involved. But playing a critical role in the deal will be Wilsons, Ord Minnett, Bell Potter and Morgans — all tasked with courting yield-hungry retail investors.

It is understood the brokers have each been asked to sell down about $100m worth of shares, capitalising on their strong retail networks.

So far, the early indications are that Brookfield is angling for an IPO worth about $700m.

The DBCT is one of Queensland’s major metallurgical coal export facilities. It handles about 20 per cent of the world’s seaborne metallurgical coal trade and will be sold with take or pay contracts in place.

The plan is to offer a yield of about 7 per cent, which is expected to prove popular with retail investors.

Retail investors are also in focus for other IPOs at a time when many listed companies have suspended dividends amid the COVID-19 pandemic and interest rates remain low.

The David Di Pilla-backed HomeCo will hire Macquarie Capital and Goldman Sachs for the listing of its Daily Needs REIT, which consists of a $900m real estate portfolio.

The company announced the plans for the float when it delivered its results last month, and expectations are it will be worth somewhere around $500m, with much of the take-up expected to be from retail investors, as was the case when HomeCo listed.

When delivering its results last month, HomeCo said it would establish the ASX-listed Daily Needs REIT through an in-specie distribution to security holders, with HomeCo to be a partial owner.

The assets will consist of property assets leased to groups such as KFC, McDonald’s, Woolworths, Chemist Warehouse, Aldi, Bakers Delight, Coles, Woolworths, Liquorland and Dan Murphy’s. The transaction is expected to happen late this year or early next year. HomeCo listed last October, and the backers of the company include Mr Di Pilla’s Aurrum Group of investors.

Others include former UBS banker Matthew Grounds, the founders of Spotlight, Chemist Warehouse, and the Besen family. The Oatley family and Aussie Home Loans founder John Symond also backed the HomeCo float.

Other companies heading to market include mining services provider DDH1, which counts Oaktree Capital Management as a major investor. DataRoom understands Macquarie Capital and UBS have been mandated to work on the float, while another adviser is also to join the line-up. Bank of America worked on the IPO when it tried to list last year, but won’t be involved this time.

Meanwhile, two float prospects that are so far proving popular with investors are Fantastic Furniture and Nuix.

The attraction to Fantastic Furniture is its online growth, comprising about $170m of its $600m in annual sales.

Comparable companies listed, including Nick Scali, trade at 12 times their earnings, and the question being asked by investors is the level of sustainability of the earnings.

Meanwhile, analytics and intelligence software group Nuix is expected to list at between eight and 10 times its revenue, which would see the group head to the boards as a business worth between $1.5bn and $2bn.