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Australia's IPO fees good news for bankers

HONG KONG/SYDNEY--Bankers in Australia have much to cheer this Christmas as fees from underwriting IPOs surge 10-fold this year, and many are now betting on an equally active year in 2014 as a slew of private equity exits keep the market busy.

In 2013, companies are expected to have raised about US$6 billion through initial public offerings, a six-fold jump from last year and the highest since 2010, according to Thomson Reuters data.

On Monday, shares in education training provider Vocation Ltd. opened up 10 percent on their AU$1.89 offer price after the company raised AU$253 million (US$230.19 million) in its IPO. Vocation last traded at AU$2.06, giving the company a market capitalization of AU$412 million.

The company's upbeat open comes after a strong performance from peers Navitas Ltd. and G8 Education Ltd. said Evan Lucas, IG's market strategist. Navitas' shares are up 27 percent so far this year, while G8's have risen 89 percent in the same period.

“It's in the right area, it's in the right industry, it's certainly getting the attention that it requires, and that's why you'll probably see Vocation doing quite well today as well,” Lucas said.

Listings Bonanza

The rush of listings, most of which are concentrated in the last two months of the year, have led some bankers to predict an IPO pipeline of at least US$5.46 billion next year, defying a slowing domestic economy weakened by falling commodity prices.

The resurgence follows two lean years in 2011 and 2012 when investor appetite for new issues slumped due to global economic uncertainty and a rash of poor secondary market performances.

“In Australia, we've been through a series of interest rate cuts ... and that combination of historically low rates plus confidence around the global growth picture as well as lower volatility has attracted a lot of investors back into equities,” said Hugh Falcon, co-head of equity capital markets for Australia and New Zealand at Macquarie Group Ltd.

The Australian IPO market has been the third-busiest in the Asia-Pacific region — behind Hong Kong and Singapore — rising from the 10th place in 2012, Thomson Reuters data shows.

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