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Johannesburg has most IPOs since 2008

Johannesburg - The number of initial public offerings on Johannesburg’s stock market in the first quarter accelerated to levels not seen since the global financial crisis as the benchmark index rose to a record and companies took advantage of the rally.

From January to end-March three companies, including Lodestone REIT and printing business Novus Holdings [JSE:NVS], sold stock.

In 2014 there were two IPOs in the first quarter, in 2013 just one, and none in 2012, according to data compiled by JSE, the operator of the bourse. The last time there were more was in 2008, when there were five IPOs before April.

“These companies are successfully able to float on the market because there’s been a roaring bull market, so if they’re a decent company, they’re likely to find support,” Sean Ashton, chief investment officer of Anchor Capital, whose parent Anchor Group [JSE:ACG] sold stock in September, said in a phone interview from Johannesburg on Wednesday.

“If something is sitting at a 10 price-earnings ratio and the market’s at 20, it will find fans.”

The average price-to-earnings ratio of the companies comprising Johannesburg’s benchmark index is 20, according to data compiled by Bloomberg. While the South African economy has slowed and unemployment is almost 25 percent, consumers have benefited from a drop in motor fuel prices and lower inflation, helping boost stocks linked to retail industries.

‘Little Resemblance’

The largest companies on the South African stock market by capitalization include SABMiller Plc and BHP Billiton Plc, which are based outside the country and benefit from weakness in the rand. The rand has declined 2.4 percent against the dollar this year while the stock market has climbed 6.5 percent and reached a record in February.

“The JSE bears little resemblance to the economy,” Ashton said.

The FTSE/JSE Africa All Share Index last declined by more than 1% in 2008 when it fell 26%. It climbed to a record on February 24, building on a 56% rally in the previous three years. It recorded growth of 4.8% in the first quarter of 2015, faster than the growth shown in the first quarter of the past two years.

“South African stocks have started 2015 on a solid note, aided by the recent drop in oil prices,” Mark Mobius, who oversees about $40bn as the executive chairperson of Templeton Emerging Markets Group, wrote in a blog e-mailed on Wednesday.

“While South Africa has been struggling with an electricity crisis that could stunt gross domestic product growth this year, we continue to believe that attractive long- term investment opportunities exist.”

Virgin Active

Virgin Active, the British gym chain, intends to hold an IPO in Johannesburg this year.

It has 263 clubs in nine countries with more than 1.3 million members, according to its website. It has 114 outlets in South Africa, more than in any other country.

Sygnia Asset Management  is also planning an IPO, which may be worth R300m, according to Johannesburg-based newspaper Business Day.

Property company Lodestone has risen 39% and Novus has gained 21% since going public.

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