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Upcoming IPOs this week

Each week I like to look at the upcoming IPOs which are happening on the ASX. It gives me a chance to see if there are any future stars being listed and perhaps get in early on that success story.

Every single share that currently trades on the ASX was a newly-listed share at one point, they should not be avoided just because they are new.

A new float is usually when a private company is looking to sell a small or large portion of the business to new investors. The funds are typically needed for the growth of the business, such as buying property, funding product development or making an acquisition.

According to ASX Ltd (ASX: ASX) there are a few upcoming listings:

Nickel Mines Limited (ASX: NIC)

Its principal activity is nickel mining.

This company wants to become a globally significant, low cost producer of ‘Nickel Pig Iron’, which is a key ingredient for the production of stainless steel.

Nickel Mines holds an 80% economic interest in the Hengjaya Mineralindo Nickel Mine, which is located in Central Sulawesi, Indonesia.

The company has a collaboration and subscription agreement with Tsingshan, China’s largest stainless steel producer.

It’s looking to raise $200 million at $0.35 per share and then start trading on the ASX on 2 August 2018.

Vitalharvest Freehold Trust (ASX: VTH)

Its principal activity is investing in real estate as a listed investment trust.

It is the owner of one of the largest aggregations of citrus orchards and one of the largest aggregations of berry farms, they are leased to Costa Group Holdings Ltd (ASX: CGC).

It owns seven farms that together grow blueberries, raspberries, mandarins, oranges, grapefruits, lemons, lemons, avocados, persimmons and wine grapes.

The business will list at a premium of 27.2% premium to the pro forma net asset value (NAV) per unit at 31 December 2017. The offer price is $1 and the pro forma NAV per unit is $0.79. It plans to pay an 8% distribution yield with a payout ratio of 90%, with a distribution expected every six months.

It said that the starting gearing will be 39.8% and the weighted average lease expiry (WALE) is eight years, with a 10-year option to extend. It also receives a profit share of the tenant’s earnings from the properties.

However, it must be said that Costa Group Holdings is not affiliated to Vitalharvest or its manager. Costa said that future expansion will not involve Vitalharvest and does not intend to expand operations at the Vitalharvest farms. Costa also said that at the end of FY19 all raspberry farming operations will have been relocated from the two Vitalharvest sites and added to Wesley Vale, which isn’t a Vitalharvest site.

Aside from also being an agricultural REIT, I think there are significant differences between Rural Funds Group (ASX: RFF) and Vitalharvest. I currently much prefer Rural Funds Group due to the rental indexation built into its contracts, despite the lower yield.

However, Vitalharvest does offer a nice yield and it can easily expand to own more properties as time goes on. Costa isn’t the only food producer in Australia that could rent its properties.

It’s looking to raise $185 million at $1 per unit and then start trading on 1 August 2018.

Foolish takeaway

Two large listings this week. I was fairly interested in Vitalharvest when I first read it was listing, however after reading the details of the NAV premium and Costa distancing itself I’m not so enthusiastic about it. I will keep it on my watchlist.

Nickel Mines could generate good returns, however resource businesses are not for me, so I won’t be investing in this one.

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Motley Fool contributor Tristan Harrison owns shares of COSTA GRP FPO and RURALFUNDS STAPLED. The Motley Fool Australia owns shares of and has recommended COSTA GRP FPO and RURALFUNDS STAPLED. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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