Investors are gearing up for another strong year of listings on Germany's stock market in 2008 with up to four heavyweights in sight despite turbulence on global equity markets, bankers said.
"We are cautiously optimistic for 2008," said Joachim von der Goltz, co-head of equity capital markets at JPMorgan. "We are expecting more than 20 IPOs with an issuing volume of more than 100 million euros each," he said.
Possible top candidates included German rail operator Deutsche Bahn, industrial conglomerate Evonik, German regional state bank HSH Nordbank and Germany's third biggest-insurer Talanx, bankers said.
"With Deutsche Bahn and Evonik it will be less dependent on the market situation than on the companies' own development. There will most definitely be a market for them," said Andreas Bernstorff, managing director of equity capital markets at Citigroup.
Global equity markets took a sharp downturn after hitting record highs in July, as problems in the U.S. mortgage market prompted banks worldwide to reassess their investment structures and issue massive writedowns, leading to a liquidity crunch.
The market's downturn put off several companies and while 18 companies listed in Deutsche Boerse's prime standard segment in the first half of the year, the second half featured only five and several candidates postponed their plans.
The total issuing volume was more than 7 billion euros ($10.17 billion) in 2007.
For 2008, Germany's benchmark DAX index is in for a rise of around 6.3 per cent, about a third of the annual gains it has managed over the past several years, a Reuters poll of equity strategists showed.
"If the market holds up, I think we may see a similar amount of IPOs next year as in 2007," said Klaus Froehlich, head of German equity capital markets at Morgan Stanley. "If not, only the best ones will make it," he added.
JPMorgan said equity markets remained open for high quality issuers, provided they offer a convincing equity story, strong management team and strong cashflows combined with attractive growth prospects.
PRIVATE EQUITY EXITS
A decent flow of IPOs may also come from private equity companies exiting via the stock market and Sal. Oppenheim estimated that up to 40 per cent of next year's listings would come from private equity.
Morgan Stanley's Froehlich estimated that in 2008 up to 10 companies from private equity portfolios would list.
With multiples not looking as attractive as about half a year ago, the stock market had become an increasingly attractive option for private equity, Ralf Neuhaus, head of investment banking at HSBC Trinkaus, said.
Bankers expected to see several listings from appealing sectors like transport and renewable energy, while things were still not looking so good for the real estate sector, especially after the housing crisis in the United States.
"So far, I can't see that the situation has changed there," said Citigroup's Bernstorff.
With a large backlog of companies, which had aimed for a listing in the second half of 2007 and were now keen to float as soon as market conditions improved, IPO activity may pick up in the second quarter of next year.
"I could imagine that the second quarter will be very crowded and maybe the beginning of the third as well," said Froehlich, adding potential stock market candidates would probably wait and see how some of the full-year results in the financial sector turn out. (Reuters)