IPO Watching
A game that is always popular at the Resources Roadhouse is one we call, “IPO Watching”.
The rules are simple enough. As each Initial Public Offering listing hits the boards we make a hypothetical purchase of 10,000 shares at their issue price, add it to the Resources Roadhouse watchlist and sit back to see how they go.
Since the beginning of 2011 there has been, at the time of writing, 34 new resources and associated sector IPOs.
Each year brings new ventures forth to provide fascinating watching as the fledgling companies strive to maintain the shareholder base momentum that raised the funds to bring them into being.
Success stories are fewer than their rivals that don’t do quite as well however, which is why IPOs are considered a more speculative rather than definitive investment strategy.
So, who is standing out from this year’s listings so far?
According to the Roadhouse watchlist Daton Group Australia has opened a substantial gap for others to follow.
Our initial, hypothetical, investment in Daton of $2500 at 25c per share in January is now worth a very tidy $7800.
Daton is one of China’s leading producers of coal-based urea, methanol, and carbon dioxide with production facilities located in Jiaozuo City, Henan Province in China.
The company’s main product is urea, which it has been producing since 2001.
Urea is the most commonly used nitrogen fertiliser in China with sales of urea accounting for approximately 55.4% of the company’s total revenue in 2009.
Daton also produces methanol and recycled carbon dioxide, sales of which accounted for approximately 34% and 10.3% of its total revenue in 2009.
A $2000 hypothetical investment at 20c per share in renewable energy company Algae.Tec has bloomed to $3750.
The Subiaco-based advanced biofuels company is focused on commercialising technology that produces algae to manufacture sustainable fuels such as bio diesel and green jet fuel.
New chums to list on the ASX this week included Nemex Resources and Polymetals Mining.
Iron Ore hopeful Nemex is focused on bringing its iron ore projects in the mid-west region of Australia and Guinea, West Africa into a resource phase.
The 20c offering’s first day on the boards was somewhat subdued listing at 21c to close at 20.5c.
The $1.00 offer price of Polymetals seemed to attract a bit more attention coming on at $1.10 to close at $1.08.
The Queensland-based company is a producer of base and precious metals with cash flow positive operations in South Australia and development projects in New South Wales and Western Australia.
Other companies waiting in the wings to list during the month of May include Kimberley Rare Earths Limited (KRE).
KRE is looking to raise up to $14.3 million through the issue of up to approximately 71.5 million Shares at $0.20 each.
The funds raised will be dedicated to advancing the Cummins Range rare earths project located around 130km southwest of Halls Creek in the East Kimberley Region of northern WA.
Subject to certain conditions KRE will acquire an immediate 25% ownership of the Cummins Range Project from its parent company, Navigator Resources, with the opportunity to earn an additional 30% interest with expenditure of $10 million in exploration over a four year period to obtain a majority 55% interest.