Opinion is divided over the wisdom on investing in ASX-listed ICT companies, despite more channel organisations looking to shift to the public arena.
With a number of high profile cases of channel organisations set to list on the ASX soon, IT would seem to be a strong investment opportunity, but some experts caution against potential high risk investments.
Last week, datacentre organisation, NextDC, announced the intention to list on the ASX by mid-December. Investors will be able to buy into the IPO at $1 per share as NextDC seeks $40 million in capital.
The datacentre was co-founded by telco veteran, Bevan Slattery, who had previously enjoyed enormous success in listing Pipe Networks which was sold to TPG for $373 million.
According to Slattery, the IT industry is a fast-growth one, which in turn presents investors with an attractive proposition.
“Alongside resources, it’s one of the fastest growing industries in Australia,” he said. “Looking forward to the next five to 10 years, I see that trend continuing.”
However, despite this, Slattery also anticipates an investment market that is difficult under typical conditions for the IPO.
He is confident that NextDC will be able to attract a mix of retail and institutional investors, but warned other organisations might not be so fortunate.
“NextDC is in an unusual position in that it has a track record – Pipe Networks was one of the most successful IPO's in the ASX in the technology space,” he said.
“In normal circumstances, it would be certainly difficult to attract shareholders to an IPO in the current market.”
David Dicker’s business, Dicker Data, will also list in mid-December, with shares being sold at $0.20 each. Dicker has described the listing as one of compliance, and the distributor is limiting the number of investors to 500.
Hostech chairman, Peter Kazacos, also considers the investment climate a difficult one at present.
“I think there’s a bit of caution in people wanting to list; I think it will still be difficult to get institutional support,” he said.
“Technology companies are still seen as high risk in many cases. We’ve had the tech boom and bust period and some subsequent poor performance.
“Larger capital funds are not embracing technology as they had in the past – rather they’re investing in the mining sector.”
But despite this lack of institutional support, Kazacos said there were still investors willing to take the risk for the large-scale opportunities currently in the market.
“With private money, it’s coming from high network individuals who have an existing affinity to the industry. There’s also some investment from smaller capital funds,” he said.
“With the NBN, the Government is going to make significant investments there, and people have the ability to leverage that to gain some momentum and sales.
“There’s also the cloud – cloud companies looking to list could find plenty of investors, I would think.”
From the point of view of an investment fund, CVC Investment Fund chairman, Alexander Beard, claimed the climate had improved considerably in recent months, and that IT was not a greater risk to investors than any other sector.
“It depends on the niche, but any industry can be high risk,” Beard said.
“It’s better now than it’s been in the last five years – there’s a better flow of deals, and generally investment opportunities are much better.”
CVC – whose investment portfolio includes Cellnet, Mnet Group, and non-IT organisations such as food company, Silver Bird, resources and energy companies Resource Generation and Amadeus Energy, packaging manufacturer, Pro-Pac Packaging, and CVC Property Fund – looks for people and talented boards when making investment decisions, irrespective of the industry, Beard said.
“It’s always about people – we look for good management teams, and the company has to make sense and offer good margin,” he said.
