Even though the world feels like it has become increasingly divided in 2021, there have been a handful of moments that each and every one of us can celebrate. After all, we finally freed Britney, the Toyko Olympics didn't let Delta rain on its parade, and Australian businesses have survived more lockdowns than we would have liked and come out on the other side bigger and better than ever.
In fact, there have been 153 initial public offerings on the ASX this year, up from just 67 in 2020. That's an increase of more than 153%. And in case you thought 2020 may have just not been a great year for IPOs - it was the year "coronavirus" became a household name, after all - there were 64 in 2019 (according to IPO watch).
That said, only a handful of this year's IPOs have caused a media frenzy and captured the public's attention. So in this episode, Livewire's Ally Selby is joined by Ausbil Investment Management's Arden Jennings and Wilson Asset Management's Tobias Yao for their thoughts on three of 2021's most anticipated IPOs.
Plus, with 2022 only four weeks away (we did it!), they share two for you to look out for over the year ahead.
Note: This episode was filmed on Wednesday, 24th November 2021. You can watch, listen or read an edited transcript below.
Hey, how are you doing and welcome to Livewire's Buy Hold Sell. I'm Ally Selby and while 2021 has been a year of many things - think lockdowns, lockdown puppies, and crazy cryptocurrencies, it's also been a year of IPOs. In fact, more than 150 companies have listed on the ASX this year and we still have a few weeks to go. So to discuss some of the hottest IPOs from 2021, as well as two to look out for over the year ahead, we're joined by Arden Jennings from Ausbil Investment Management and Tobias Yao from Wilson Asset Management.
First up, we have Airtasker, which listed in March this year. Arden, I might start on you. Is it a buy, hold, or sell?
Arden Jennings (HOLD): It's a hold for us. We didn't participate in the IPO. It certainly did incredibly well in the first week. I think it was up over 200% and we thought what have we missed? But, while we like management, we had a few reservations about the business. We thought that it was probably expanding offshore a little too quickly, and it's still going to be loss-making for the next few years. So, it wasn't an opportunity that we decided to pursue for the fund, but potentially one for the watch list.
Ally Selby: It recently reported that its gross marketplace volume was up 6.2% year on year. Tobias, over to you. Is it a buy, hold, or sell?
Tobias Yao (BUY): We think Airtasker is a buy. It's a founder-led business. I think the market's focused on the UK and the US expansion opportunity. But we think the real opportunity's closer to home. If they can increase the frequency of usage on their platform from under two times to over two times, in our view, they can continue to grow over 25% over the next three years, and we think that's attractive. And the current price is a good entry point. So it's a buy for us.
Ally Selby: Next up, we have Siteminder, which listed earlier this month. It provides online commerce solutions for hotel groups. Tobias, I'll stay with you. Is it a buy, hold, or sell?
Tobias Yao (BUY): Siteminder is a buy for us as well. We bought Siteminder in its IPO. We think they can continue to gain market share globally, particularly in the mid to small segment of hotels. Over time, they can continue to sell more transaction type products to their existing customer base. So, we think that growth is underestimated by the market and so it's a buy.
Ally Selby: Arden over to you, Siteminder was seriously a hot IPO this year. Is it a buy, hold, or sell?
Arden Jennings (BUY): It certainly was hot, Ally. And you can never get enough of the hot ones. It's a buy for us. We hold a position in the Ausbil Funds. They are really the middle person between the hotel software and the channel partners to bring products to the customers. So, we like the long term outlook for the business. Although it is a technology stock, it's got that reopening element to it. I think the one challenging piece here post-IPO is the valuation. Expectations are probably for roughly 10% growth this year, but as we come out into the recovery, we really need to see an acceleration in that growth to be much higher than that to justify the valuation. But having said, that we still like it on a long term view, so it's a buy.
Ally Selby: Arden last, but not least, we have DGL Group, which listed in May earlier this year and has had one of the most successful IPOs. Is it a buy, hold, or sell?
Arden Jennings (BUY): For us, it's a buy, Ally. It's a high conviction position in both the Ausbil Small-Cap and Ausbil Microcap Funds. It's founder-led, established in 1999. Simon Henry, the CEO, did not sell down at the IPO. They raised for growth. We think there's a fantastic opportunity for them to continue to grow both organically and inorganically through acquisitions. We think that even though the share price has done terrifically from $1 IPO to well over $2 today, investors haven't missed the opportunity and it is worth doing some homework on. Simply taking the FY21 result, adding a modest amount of organic growth, and the recent acquisitions that they've made publicly, you can get earnings that are significantly above expectations from the brokers. So, we think there are upgrades to come and it certainly reminds us of some of the fantastic opportunities in our Fund like Johns Lyng and Uniti that have made transformational acquisitions, but it takes a while for the market to catch on. So, we think it's a buy.
Ally Selby: Just in case our viewers are unaware, DGL provides chemical supply chain solutions for companies. Tobias, over to you. Is it a buy, hold, or sell?
Tobias Yao (BUY): It's a buy for us as well. We like founder-led businesses and in our view, the barriers to entry for the industry is underappreciated by the market. We think there's around $50 million of capital which they can deploy into inorganic opportunities, acquisitions that could be EPS accretive. So, the growth prospects look very bright. So it's a buy for us.
Ally Selby: I'm really excited for this. We asked our fundies to bring along one stock that they're really excited to see IPO next year. Tobias, what have you brought for us?
Tobias Yao: My pick for next year is a company called Packform, which is a business to business software solutions provider for the packaging industry in the US. It's founded by a very successful and astute businessman with a management team with very deep domain knowledge. So, it is helping to solve the status quo in the packaging industry, which is very inefficient. The business has a really impressive growth profile and earnings profile as well. And we think they can continue to conquer the US state by state. So it's Packform, for us.
Ally Selby: Arden, over to you. Is there an IPO in 2022 that has you excited?
Arden Jennings: We've got one or two and one of those would be Phocas. So, it's a business that's founder-led. It focuses on analytics and helps businesses interpret their data and display it in a meaningful way for them to improve their processes. The business has been growing around 20% on the top line. It's highly recurring with over 85% recurring revenue, very low churn, which is a great indicator of a healthy customer base and customers that want to continue using the product. They're expanding over into the US and UK, with operations also in Australia, and it's profitable and cash-generating. So, we like it. We are looking forward to that one in 2022.
Ally Selby: Well, I hope you enjoyed that episode of Buy Hold Sell as much as I did. If you did, why not give it a like? Remember to subscribe to our YouTube channel, we're adding new content every week.