Liberty Financial lifts on its ASX debut
Shares in Liberty Financial climbed after listing as the non-bank lender expressed optimism in the economic outlook and growth opportunities.
LINE POINTER: KIRBY, P19
Liberty Financial’s shares received a positive reception on their ASX debut, as the non-bank lender expressed optimism in the economic outlook and its ability to tap shareholders to seize growth opportunities.
Liberty’s shares soared almost 17 per cent to $7 on Tuesday, compared to a listing price of $6, capping a strong float amid a mixed market performance for ASX listings in recent months.
Liberty’s initial public offering plans were helped by founders, including Sherman Ma, retaining stakes and a handful of institutional investors agreeing to take cornerstone holdings in the float.
As part of the transaction, one of the largest IPO raisings of the year, Liberty offered 53.4 million shares, reflecting the proceeds of a transfer of shares of $320.7m. At the listing price, the company had a market capitalisation of $1.8bn.
The rally in Liberty’s stock comes after the post-IPO trading of smaller non-bank lenders Plenti and Harmoney disappointed investors over the past three months. But underscoring the mixed results, shares in fellow ASX debutant and technology firm Nuix soared on its first day of trading early this month.
A rush of ASX listings ahead of the year’s end also caused investor fatigue and more scrutiny of offers, leading to some IPOs, such as those of oyster producer East 33 and law firm HWL Ebsworth, being shelved.
Speaking ahead of the IPO, Liberty chief executive James Boyle said the group had a “really positive reception from the institutional investors” it engaged with, buoyed by its presence in debt capital and securitisation markets.
“We thought that our story had a differentiated and maybe a unique appeal among perhaps what else was out there. The more discussions we had, the more favourable feedback we got, so we thought it was the right time for us (to list),” he added.
“We believe in our story... we take the long-term view.”
Mr Boyle said a significant majority of new investors to Liberty were institutional and a smaller proportion were mum and dad shareholders.
Liberty’s IPO only included a small selldown by existing investors.
Regal Funds Management was among institutional investors that bought shares in the IPO.
“They have a long history of success,” Regal’s investment chief Philip King said of Liberty. “They will continue to win (market) share at the expense of the banks, who are distracted by regulation.”
On the small portion of shares in the free float for Liberty’s listing, Mr King said: “Hopefully liquidity improves over time and we’d expect the free-float to increase at some point in the future.”
Mr Boyle expressed optimism about the domestic economy in 2021 and confidence in Liberty’s declining rate of loans on COVID-19 repayment pauses.
“We have seen really positive engagement from our customers around any kind of arrangements that were made around COVID-19, and if that’s a lead indicator of how we are tracking economically, I think we should be quite positive about the path forward,” he said.
About 0.7 per cent of Liberty’s loan book was on a repayment deferral arrangement at peak pandemic levels, and the figure was now “well below” that, according to Mr Boyle.
As at September, just 0.4 per cent of Liberty’s loan portfolio was on repayment pauses.
Mr Boyle also said Liberty was taking a long-term approach to growth opportunities and acquisitions, and equity capital markets offered another funding source.
“We’ve got a pretty good track record of putting the right things in place in our business to make it a sustainable organisation over the medium to long term,” he added.
“So adding equity capital — as another sort of arrow in the quiver means that as we look forward over the horizon... we feel we are putting ourselves in the strongest position to make the most of that opportunity.”
A prospectus lodged last month showed Liberty expects adjusted net profit of $165.6m in 2020-21, which includes amortisation of intangible assets, or a net profit of $153.9m.
The adjusted net profit is up from $142m last financial year. But the prospectus forecasts are for Liberty’s total income to dip to $838.2m in 2020-21, from $852.1m a year earlier, with total expenses also declining over the period.
The prospectus also highlighted some pitfalls in Liberty’s proposed structure. The listed entity includes a company and a trust under a stapled structure. The company is liable for 30 per cent Australian tax, while the trust isn’t liable for local income tax.
The Australian Taxation Office may seek to apply legislation to tax the trust at 30 per cent, and the prospectus pointed to the prior local holding company of Liberty having received “amended assessments” from the ATO for past years.
Asked about the matter, Liberty’s finance chief Peter Riedel said it was scheduled to be heard by the Federal Court in November 2021.
Liberty intends to pay an unfranked dividend in July and is targeting a dividend payout ratio of between 40 per cent and 80 per cent of expected net profit.
The prospectus said the lender, which operates in the residential home loan, motor and commercial finance and personal loan markets, planned to pay its first dividend to reflect the period from December to June 30.
Liberty typically focuses on customers that don’t meet the home loan criteria of the major banks, a part of the market often referred to as nonconforming lending.
More mutual mergers on the horizon
People First Bank, the combined Heritage Bank and People’s Choice, is planning for further growth, with boss Steve Laidlaw targeting roll-ups with like-minded rivals.
Japan looks past ‘risks’ for investment push
Japanese investors are looking at Australia’s economic story of growth and stability as an opportunity, and in recent years inbound investments have surged.