Kirk LaughlinSANTIAGO — The list of Chilean companies waiting to debut on the local market continues to grow, as recent successful initial public offerings confirm a healthy appetite for new investment opportunities amid robust economic growth.
Three companies have already listed shares on the Santiago Stock Exchange this year and another one is set to debut later this month, after the lone 2010 IPO of farmed-salmon producer Compania Pesquera Camanchaca SA .
As surging domestic demand has fueled Chile’s quick economic recovery following a 2009 recession and a devastating February 2010 earthquake and tsunami, investor confidence has consolidated and corporate expansion plans have taken off. The central bank forecasts a 5.5% to 6.5% on-year expansion of gross domestic product in 2011.
“Forecasts for strong economic growth this year and next couldn’t be better. To take advantage of this growth, companies are putting together aggressive expansion plans, which necessarily require financing, and IPOs are a clear solution for this,” said Ramon Suarez, head of equity research at local brokerage Munita Cruzat & Claro. Also, interest in accessing the capital markets increased as Chile’s blue-chip Ipsa index jumped nearly 38% in 2010.
“Planning an IPO takes many months and interest took off last year in line with the Ipsa’s surge,” said Jose Zamorano, director of corporate financing with investment bank Celfin Capital.
Local farmed salmon producers, which are recuperating from a lethal virus that first hit their fish in 2007, have turned to the stock market to finance their expansion plans.
“We concluded that [an IPO] was the best way to obtain resources to finance part of our expansion plan … there’s a lot of investor interest to participate in the salmon industry. In fact, our IPO was 22 times over-subscribed,” said Andres Saint Jean, chief executive of farmed-salmon producer Australis Seafoods SA , which debuted on the local bourse earlier this year.
The renewed rush of IPOs, however, has a downside and helps explain why the Ipsa index is lower on the year.
“Investors have cashed in shares to participate in the IPOs and all the recent capital increases,” said Cristina Acle, head of studies with local brokerage Corpbanca.
Local pension fund managers, Chile’s biggest institutional investors, have been selling part of their stakes in existing shares, to make room to buy into upcoming IPOs and capital increases. AFPs, as the pension fund managers are called, could continue selling shares of listed companies, as “there are more interesting investment opportunities in the pipeline,” said Acle.
The government’s sale of a 30% equity stake in water utility Aguas Andinas SA (AGUAS-A.SN) Wednesday, for instance, raised nearly $1.0 billion. Participants are now gearing up for health-care company Cruz Blanca Salud’s IPO-which Celfin Capital is arranging–scheduled for June 23.
“Cruz Blanca’s investor road show has resulted in some 120 meetings across Latin America, the U.S. and Europe. There’s a lot of interest in a company that will bring diversity to someone’s investment portfolio,” said Celfin Capital’s Zamorano.
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