18 Nov 2013

Dick Smith float shows hot market for IPOs - analyst

7:07 am on 18 November 2013

An analyst says the planned float of electronics retailer Dick Smith is another sign of just how hot the Australian market for IPOs is.

Private equity group Anchorage Capital Partners plans to sell 80% of Dick Smith for A$344.5 million and to list the shares on the ASX next month.

Anchorage, which plans to keep 20% of the retailer, bought Dick Smith from Woolworths just a year ago for less than a third of what it plans to raise from the float, or an effective $A94 million.

Milford Asset Management analyst Victoria Harris questions how much value Anchorage can have added in just 12 months and says Anchorage's aspirations say more about the state of the market than the Dick Smith's business.

"The market's strong at the moment, they want to get it out before Christmas, every other IPO - most of them have done well - it seems a good time from their point of view," she says.

Ms Harris says some IPOs in Australia have closed their roadshows early because the demand has been so strong, and a few have been very over-subscribed.

She says shares in the company Freelancer, which were sold for 50 cents each, began trading on Friday at five times the float price.

Ms Harris says Milford has been significantly scaled back on a number of recent Australian floats.

Dick Smith has 359 stores in New Zealand and Australia and expects to generate sales of $1.2 billion in the 2014 financial year.