Among some of the most anticipated names are fashion retailer Boohoo.com, which floated earlier this month, Pets at Home and discount retailer Poundland.
When Boohoo’s shares listed on the AIM market on 14 March, they shot up 70 per cent on the first day.
Poundland also saw a strong surge, trading 15 per cent above its 300p IPO price.
FE Alpha Manager Giles Hargreave (pictured) says he’s taken part in a number of the IPOs so far this year, including those of Boohoo.com and Poundland.
“We’re doing a lot of them because a lot of them have been very good,” he said.However, Hargreave points out that while many of the stocks have been a success, they can just as easily fall, as was the case with Pets at Home.
“Boohoo.com was terrific and Poundland we placed at £3, now it’s £3.78. On the other hand, Pets at Home went to a discount,” he said.
Hargreave says this is a lesson in why investors need to understand what they’re buying at launch, and not get swept away by the success stories.
“You can’t do them all willy-nilly and expect to make money on all of them,” he said.
“However, generally they are priced to go on a premium. You’ve got to get involved because there is money to be made.”
With this in mind, Hargreave and his team at Hargreave Hale highlight four stocks yet to list this year that could present good value for investors willing to take on the risk.
Brit Group
Siddarth Chand Lall, manager of the outperforming Marlborough Multi Cap Income fund, says insurance company Brit Group could offer investors the chance to grab both growth and a healthy dividend payout when it floats in April.
Performance of fund vs sector over 3yrs
Source: FE Analytics
The manager says the firm has been open about its intention to pay both regular and special dividends if excess capital cannot be “attractively deployed”, which is a sign it is already thinking about shareholder interests.
Chand Lall adds that the size of the IPO range indicates yield figures in the region of 6.8 per cent to 8.2 per cent on the high end.
“The management seem sincere in terms of potential return on capital, and the solvency ratios are healthy,” he said.
“They have been responsive when I asked the question [about potential special dividends], which is quite encouraging because they are thinking about shareholders.”
The manager says it also looks like the deal is covered at the low end, which adds a degree of stability for investors as the fortunes of a stock can be foggy on the initial hype of listing.
Scholium Group
Another stock Chand Lall likes is rare books dealer Scholium, which is set to hit the market next Thursday (27 March).
The group owns Shapero Rare Books in Mayfair. The stock is expected to list with a market cap of £13.2m and was oversubscribed at £8m.
Chand Lall has confidence in the leadership of Philip Blackwell of Blackwell Publishing fame, who was previously chief executive of Blackwell’s academic book retailer.
The manager says the stock will have an attractive dividend of 4 per cent and has the potential of delivering strong returns once it hits the ground running.
“Once they get momentum, it could be very cash-generative next year,” he said.
The rare books arm of the business made more than £5m in revenue in 2013, owing largely to demand from wealthy Russian buyers.
The average price of a book sold from Shapero tops £6,000, with the first printed atlas from 1473 selling for a whopping £2.5m.
Horizon Discovery
Biotechnology and life sciences firm Horizon Discovery is on the radar of Oliver Bedford, who runs the Hargreave Hale VCTs.
The firm, which is set to float later this month, is hoping to raise £25m in its IPO.
It is attractive in two ways, according to Bedford; firstly in that it provides technology to help major pharmaceutical companies such as AstraZeneca and GlaxoSmithKline bring drugs to the market in a more cost-effective and efficient way; and secondly that it plans to keep its intellectual property within the UK.
“It will help pharmaceutical companies better understand the likely impact of patients’ genomes on drugs,” Bedford said.
He points out that it currently costs a gargantuan sum to bring a drug to the market, and what Horizon Discovery does is help major pharmas rule out certain gene traits which are unresponsive to certain types of drugs, thus eliminating these patients from costly clinical trials that aren’t likely to elicit results.
From here, the firm is also building what is effectively a genome database – something Bedford said is typically sold to firms outside the UK.
However, Horizon plans to retain its IP, keeping a catalogue of information that can be re-sold to other clients.
SafeCharge
Another IPO Hargreave is keeping an eye on is payments provider SafeCharge, which is headed up by Israeli entrepreneur Teddy Sagi.
The firm hopes to raise $100m when it joins the AIM market this year.
Other stocks that are hitting the market this year include luxury footwear designer Jimmy Choo, online takeaway ordering company Just Eat and Lloyds Banking’s TSB business, to name a few.
