Investors should be ready for a different-looking ASX in 2022

There are big changes ahead for the ASX across many sectors — and investors need to be across the opportunities, says Pendal equities analyst Elise McKay.

• Established players impacted by corporate activity
• Large scale IPOs in the pipeline
• Find out more about Pendal Focus Australian Share Fund

THERE are big changes ahead for the S&P/ASX 200 across many sectors — and investors need to get up to speed quickly on the opportunities, says Elise McKay, an investment analyst with Pendal’s Aussie equities team.

The list of corporate activity among ASX-listed companies is long — as is the list of big, upcoming initial public offerings.

“Many investors will have cash being released from M&A [merger and acquisition] targets that needs to be redeployed into new ideas,” says McKay.

Buy-now-pay-later group Afterpay is being acquired by US fintech giant Square which will then undertake a secondary listing on the ASX. Santos is merging with Oil Search, while Woodside is expected to combine with BHP’s oil and gas assets.

Sydney Airport is under takeover offer and Endeavour has just demerged from Woolworths Group.

APA is bidding for AusNet, as is Canadian giant Brookfield. Wesfarmers and Sigma Healthcare are in a tussle for Australian Pharmaceutical Industries and Seven Group has acquired a controlling stake Boral.

Major ASX listings ahead

Coming out of the Covid period, there is an unusual number of big IPOs planned for the ASX in coming months.

“The pipeline for large IPOs over the next couple of months is as strong as we have seen in recent years,” McKay says.

“The IPOs represent a range of new opportunities that shouldn’t be ignored — particularly those that provide access to attractive new industries such as global fintech, secular growth stories such as Siteminder or Judo or those with attractive valuations early in their listed lifetime.

“My advice is to get up to speed on these IPOs early.”

Maintenance service group Ventia, owned by listed CIMIC and PE group Apollo Global Management, is expected to hit the bourse worth more than $2.5 billion.

Global equities manager GQG Partners wants to list and is tipped to be valued at more than $1 billion. Neobank Judo is meeting with investors. So too are Vulcan Steel and New Zealand telecommunications company Orcon.

There’s the mooted $5 billion listing of SG Lottery, which is owned by American gaming group Scientific Games. And technology group SiteMinder is expected to hit the bourse in coming months with a valuation north of $1 billion.

The top 100 and 200 companies on the Australian Securities Exchange could look very different in just a few short months, McKay says.

“You are seeing a shift in the composition of the Australian index,” McKay says. “For example, one of the world’s best fintechs Square is going to be listed on the ASX.”

With Covid-delayed IPOs and M&A activity now firmly back on the agenda, a new range of opportunities is emerging — and fundamental investors should to get up to speed quickly on these businesses, McKay says.  

When it comes to investing in initial public offerings, every stock should be separately “diligenced”, says McKay.

“Often the prospectus provides the most information you will ever get about a company,” McKay says. “It’s a great opportunity to do a deep dive into a company.”

About Elise McKay and Pendal Focus Australian Share Fund

Elise is an investment analyst with Pendal’s Australian equities team. Elise previously worked as an investment analyst for US fund manager Cartica where she covered a variety of emerging market companies.

She has also worked in investment banking and corporate finance at JP Morgan and Ernst & Young.

Pendal Focus Australian Share Fund is a high-conviction equity fund with a 16-year track record
of strong performance in a range of market conditions. The Fund is rated at the highest level by Lonsec, Morningstar and Zenith.

Pendal is an independent, global investment management business focused on delivering superior investment returns for our clients through active management. 

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