Why more New Zealand companies are dual-listing on ASX

Photo of Henry Chung By Henry Chung

min read

Two-way benefits for strong-growth companies and investors

A New Zealand Stock Exchange (NZX) listing allows access to investors who focus on NZ companies, but broadening the investor base is a key driver for NZ companies to dual list on ASX.

A 2014 survey of by Orient Capital found that an ASX listing enabled NZ companies to access an investment pool of $241 billion, five times the funds available to solely NZX-listed companies. NZ companies can benefit from increased broker awareness and research analyst coverage.

Last year ASX further smoothed the path for dual listing with the introduction of the NZ Foreign Exempt listing category, which removed the prospectus requirement and effectively allows a company to focus on compliance just with the NZX Listing Rules (rather than also having to comply with all the ASX Listing Rules).

ASX dual-listed stocks account for:

  • Nine out of 10 of the NZX 10.
  • 60 per cent of the NZX 50.
  • Three out of the four most recent NZX Main Board IPOs.

Australian investors previously restricted by mandate or who did not want to deal with the administrative hurdles of buying on a foreign exchange, have a growing selection of companies to diversify their exposure.

New Zealand market outperforming

The NZX 10 and NZX 50 indices are up 19.4 per cent and 18.4 per cent respectively over the past year. Underpinning the strong performance of NZ-listed companies is the country’s continued economic growth, which is forecast to strengthen from 2.6 per cent in the year ending June 2016 to 3.2 per cent in the year ending June 2017. This is driven by strong population growth, sustained increases in services exports, particularly tourism, and the stimulatory effects of low interest rates.

Ultimately, adding a listing in Australia is often a natural evolutionary step for growing NZ companies, particularly those materially expanding their businesses in Australia.

An example is NZ-founded AFT Pharmaceuticals, a fast growing company that develops, markets and distributes a broad portfolio of pharmaceutical products across a wide range of therapeutic categories.

Five years ago, Australia represented 22 per cent of AFT’s sales. Today, Australia is AFT’s biggest market, representing about 49 per cent of sales. AFT floated on NZX and ASX in December last year.

As AFT’s Australian business grows, an enhanced visibility in both key markets is logical. This natural evolution is happening with other heritage NZ companies, such as Michael Hill International. It is currently in the process of moving its primary listing to ASX, as 60 per cent of the company’s revenue is derived from Australia and it now reports in Australian dollars.

Where Australia is a key growth component for an NZ company which is raising capital, Australian investors may be better placed to understand the growth story and undertake independent due diligence, and thus provide additional support for capital raisings.

An example is the a2 Milk Company, which dual listed in March 2015, raised growth capital in October 2015 and now has Australian investors representing the majority of its share register, as shown by the two charts below.

Chart of NZ companies

Source: The a2 Milk Company, FY16 first-half results.

With a2 Milk’s Australian operations comprising the most significant component of the business and growth, Australian investors may have had an advantage to understanding the daily changing market dynamics compared to their NZ counterparts, who do not see a2 Milk’s products on their supermarket shelves every day.

ASX listings for NZ companies can broaden the potential investor audience but that alone is no share price driver. As a company delivers what investors expect, the ASX listing can assist in getting a broader consensus of investors to support the company.

About the author

Henry Chung is a vice-president at First NZ Capital. He has extensive experience in equity capital markets, having advised on the IPOs of Mighty River Power, Synlait Milk, Genesis Energy, Scales Corporation, EROAD, Orion Health and AFT Pharmaceuticals.

From ASX

New Zealand based companies listed on ASX provides useful information on NZ companies that can be access via ASX.

The views, opinions or recommendations of the author in this article are solely those of the author and do not in any way reflect the views, opinions, recommendations, of ASX Limited ABN 98 008 624 691 and its related bodies corporate ("ASX"). ASX makes no representation or warranty with respect to the accuracy, completeness or currency of the content. The content is for educational purposes only and does not constitute financial advice. Independent advice should be obtained from an Australian financial services licensee before making investment decisions. To the extent permitted by law, ASX excludes all liability for any loss or damage arising in any way including by way of negligence.

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