Fundies say IPO hopefuls hard to assess given pandemic profit mayhem

afr.com:

As Australia’s IPO train pulls away from the station, one key issue keeps cropping up: pandemic-driven profits.

It’s no secret that a range of industries flourished during the pandemic, whether because consumers spent big on home improvement or business turned to platforms like Zoom in the shift to hybrid working.

But several fund managers who spoke to Street Talk said the earnings boost is making it harder to assess IPO hopefuls when they rock up to investor meetings with three years’ worth of financials.

Companies may have shot the lights out in the 2021 and 2022 financial years, but gaining confidence on what normalised earnings may look like, particularly during a period of slower economic growth, is the rub.

Redox’s Raimond Coneliano rang the ASX bell on Monday. It was the second listing on the ASX that day, but just the first to raise more than $100 million in 12 months. Dominic Lorrimer

One name that surfaced is Redox,which debuted on the ASX earlier this month. The company’s increased sales as government spending swelled and clients scrambled to secure a reliable chemicals distributor weighed on investors’ minds. Another is sea freight forwarder and IPO-hopeful Mondiale VGL, which had its joint global co-ordinators Jarden and UBS booking fund managers for non-deal roadshow meetings last month.

The hyper-competitive freight industry was a COVID-19 beneficiary amid supply chain congestion and soaring rates. Now, capacity has come back on as volumes fall, pushing down global freight rates to pre-pandemic levels.

Then there’sVirgin Australia, which collapsed in 2020 under the strain of the pandemic, only to re-emerge from administration with Bain Capital and return to profit alongside the rebound in global travel.

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