2013 was the year IPO fever returned to Australia following the aftermath of the GFC. Many retail investors hope to get in on the ground floor of the next Google, or CSL.
Dreams of lofty gains are reinforced by mouth-watering statistics on the performance of IPO stocks touted on many financial websites. But statistics can be misleading.  For one thing, percentage gains are often based on the issue price, which is rarely available to retail investors – until recently that is.
As of 2015 a new portal for investing in IPOs appeared via OnMarket BookBuilds; retail investors can bid on IPO shares set aside for retail purchase by the IPO managers. Not all IPOs are available and there is no guarantee bids will be accepted, but it is a real opportunity to get in on that “ground floor” previously unavailable to most retail investors. The CEO of OnMarket recently made the case that performance statistics can mislead investors.  ASX IPOs listing in 2017 supposedly outperformed the ASX 200 Index by 54.2%; yet retail investors unable to secure shares at the issue price paid 14.5% higher when investing in the opening day trading price.
The second issue with price performance gains is timing, with the majority talking about gains in the first year, or even in the first months.  However, the benchmark for long-term investments as a five-year holding period can show a different story.  Here is the five-year performance for two of the best performing ASX IPOs of 2013 – OzForex Group (OFX) and Indoor Skydive Australia (IDZ).

This is not to suggest most IPOs begin to fail in time; only that short-term gains fueled by eager investors can quickly dissipate in the absence of the kinds of solid fundamentals that drive any stock, regardless of when it listed. Two of the top five performing ASX IPOs for 2014 – Bellamy’s Australia (BAL) and Bapcor Limited (BAP), formerly Burson Group – show that solid companies can withstand the test of time.

There are six upcoming IPOs operating in sectors of interest, based on potential growth or unique product offerings. The following table includes issue date, offer price where applicable, and a brief company description.

1414 Degrees Limited has a patented Thermal Energy Storage System (TESS) that can store generated electricity from any source in molten silicon to produce transferable latent heat energy.
The company has been developing the technology for over a decade, becoming an unlisted public company in 2016 with an eye on ASX listing.  The company recently entered into an agreement for the first commercial application of TESS in existing operations of poultry producer Pepe’s Ducks. The company has additional projects in early phases, one with South Australia Water and the other with Austcor Packaging in New South Wales.  1414 Degrees plans to use the IPO proceeds to build and install TESS modules at these sites.
The company’s four TESS modules can be used to store energy from gas or electricity for both heat and electrical use.  The start-up business model calls for smaller scale pilot programs for industrial customers with follow-on potential for large scale application, on either leasing or direct sale arrangements.
New Zealand based Keytone Dairy may be new to the ASX, but the company has been in the dairy business since 2011, as a producer and exporter of dairy and nutrition products, focusing on powdered dairy products. 
The company has its eyes fixed on China, where the demand for healthy dairy products is exploding at the same time the government is tightening import regulations.  Keytone has the advantage of holding a foreign manufacturer’s registration from China’s regulatory agency the CNCA, allowing import of the company’s powdered dairy products into China.
Although they operate in different sub-sectors, investors interested in Keytone may already be wondering if the company might end up being the “next Synlait”, another recent NZ dairy producer coming on the ASX.

Keytone’s product offerings are more diversified, with dairy-based processed foods and beverages – including processed foods that contain significant dairy ingredients – as well as yoghurt and ice cream powders, senior dairy nutrition products, sports nutrition and fitness whey powders, and of course, the product sending investors drooling in anticipation – infant and junior products, including formula.
The company will use most of the IPO funds for expansion of production facilities and adding a new product line.  Two new manufacturing facilities are planned, with the first projected to expand the company’s production of dry products more than three-fold – from 1,500 tonnes per year to approximately 5,000 tonnes per year.
Ocean Guardian is the new corporate name for the Shark Shield Company, in business for twenty years with shark repelling electrical products based on the company’s Shark Shield® technology.
Current products are available for surfers and divers with plans to expand into products for boaters and beach-goers.  The company generates both revenue and profit, but the IPO Prospectus Financial Results cover only FY 2016 and FY 2017.  Ocean Guardian turned a 2016 loss of $681k into a 2017 profit of 19k with revenues increasing 49%.  
In 2017 the government of Western Australia began offering a rebate for purchases of Shark Shield products which will be extended through 2018.  IPO funds will be used to expand the company’s market penetration in existing markets – Australia and the states of Florida and California in the US – as well as for development of beach and boating products and research and development on safe shark mitigation, including removing of shark netting.  
New Zealand-based Serko Limited has been in the corporate travel sector since 1994, changing its name to Serko in 2007.  The company will be dual-listed on the ASX and NZX.  Serko’s cloud-based platforms have been lauded as bringing innovation to the industry, with the company’s inclusion of Artificial Intelligence and robust content in its integrated platform connecting travel and expensing functions.  
Serko made the prestigious 2018 Corporate Travel Innovators List published by Skift, the global media and marketing company serving the travel sector. Serko also made the finalist list in the PWC (PricewaterhouseCoopers) Company of the Year category.  The company is in reality a technology company operating in the travel sector, selling its innovative travel booking and expense management software in Australia and New Zealand as well as in the world’s largest travel markets – the US, China, and India.  
In FY 2017 the company reported a revenue increase of 9% and cut its losses from approximately $6 million dollars to $3.4 million.  In Serko’s interim 2018 report the company posted its first profit of $1.2 million along with revenue growth of 30%.
The company listed on the NZX in 2014 at $1.13.  Failure to reach profitability weighed on the stock price, which fell to $0.25 in April of 2017.  The interim results reported in October lifted the stock price as high as $2.17, making Serko the best performing stock on the NZX through November of 2017.
Trigg Mining is zeroing in on Sulphate of Phosphate (SOP) from salt-lake brines in Western Australia, with current 80% ownership of three project sites with full 100% ownership expected following the IPO.
Sulphate of Potash is a compound used in fertilisers essential to agriculture. BHP Billiton embarked on a long-term project to develop its Jansen Potash operation in Canada back in 2011, shortly before the price of potash collapsed in 2012. 

The Jansen Project is on hold, while Trigg embarks on its quest for sulphate of potash, considered the highest quality potash fertiliser, superior to muriate of potash (MOP).
SOP is used in growing avocados, coffee beans, tree nuts, cocoa, berries, fruit and vegetables.  While global agricultural demand is on the upswing, Twigg Mining is still in the exploration and evaluation stages, with the IPO Prospectus stating revenue generation is completely dependent on successful evaluation of its two initial project sites.
The Wheatbelt of Western Australia produces in excess of 50% of Australia’s total wheat production, exporting 95% to Asia and the Middle East. Wide Open Agriculture is a small start up agricultural operation with a “vertically integrated” business model consisting of land assets, “protected cropping” and a wholly owned fresh produce food brand, Food for Reasons™.
The company has developed a successful protected crop growing system and is currently selling fresh vegetables through its Food for Reasons™ offerings available online and sold directly to restaurants and supermarkets as well as to wholesale buyers. 
The Prospectus highlights the company’s attempts at “regenerative” agriculture, from the retractable roof protected growing areas to the irrigation systems.  IPO proceeds are expected to go towards expanding the cropping areas.  This appears an interesting company to watch, with a close eye on translating lofty goals into top line revenue generation. 

>> BACK TO THE NEWSLETTER: Click here to read other articles from this week’s newsletter