IPO Watch Australia. Mid-Year Report. A Snapshot of Australian IPO Activity for the first half of 2018 JULY hlb.com.au

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1 Mid-Year Report IPO Watch Australia JULY 2018 A Snapshot of Australian IPO Activity for the first half of 2018 hlb.com.au Great people, great results

2 Contents Overview...1 Sector Analysis...2 IPO Subscription Rates...3 Resources Sector Analysis...4 The Road Ahead...5 Disclaimer The analysis presented in this report relates to all initial public offerings that have resulted in the listing of an entity s securities on the Australian Securities Exchange (ASX) with the exception of compliance, backdoor listings and offers of non-equity securities. The term small cap is used to refer to companies with a market capitalisation of no more than $100 million. All analysis by reference to market capitalisation on listing is based on the price at which new securities were issued. Whilst every care has been taken to ensure the accuracy of information contained in this report, we accept no liability for any error or omission, nor for any action taken in reliance on any statement or opinion in this report. No statement or opinion in this report is intended to be construed as investment advice. Properly considered professional advice should always be sought if in doubt regarding the merits of any investment. No part of this publication may be reproduced, in whole or in part, without the prior written consent of HLB Mann Judd HLB Mann Judd Australasian Association For further information Adelaide Corey McGowan cmcgowan@hlbsa.com.au Brisbane (HLB Chessboard) Peter Bishop pbishop@hlbchessboard.com.au Melbourne Jude Lau jlau@hlbvic.com.au Perth Marcus Ohm mohm@hlbwa.com.au Sydney Simon James sjames@hlbnsw.com.au Wollongong Ben Fock bfock@hlbw.com.au Liability limited by a scheme approved under Professional Standards Legislation.

3 Overview The Materials sector continues to lead the market Marcus Ohm Partner Corporate & Audit Services Perth The first six months of 2018 has seen a slower start to the IPO market, with 39 companies listing, compared to 57 for the same period in Despite the slight decline, 2018 has still outperformed the previous five-year average of 37 listings. During 2017 there were 110 listings in total and these were relatively well spread throughout the year, which is contrary to the trends seen over the past decade. Historically, approximately a third of new listings occur in the first half of the year, which would indicate that 2018 may still prove to be a positive year for the Australian IPO market. Last year s market was dominated by the small cap sector (being those with less than $100 million market capitalisation at listing). The first half of 2018 also saw a considerable number of small cap entrants however there were also eight new listings from companies exceeding $100 million market capitalisation at listing. The return of large cap companies to the market has increased the total funds raised to $2.5 billion ($1.9 billion raised in the first half of 2017). This figure is expected to climb significantly for the remainder of the 2018 year, with Viva Energy Group listing in early July raising $2.6 billion. The total funds raised has been significantly assisted with one listing exceeding $1 billion, and three other companies each raising over $100 million. The Materials sector continues to dominate new listings, with a total of 16 new entrants, while Software & Services, after strong years through 2015 and 2016, only had six listings (2017: five listings in the first six months). Energy stocks continue to struggle, with no new listings for the first half of the year. Diversified Financials was the only other sector to record more than three listings. It was a strong start to the year, with 10 new listings in January. Despite having the highest number of listings for the year, the month of January recorded the lowest total funds raised, with just $50 million, or 2% of the total for the six-month period. L1 Long Short Fund Limited listed in April, raising $1.3 billion, which meant that April was the strongest month, accounting for 65% of all funds raised for the six-month period. May was also a relatively strong month, recording seven new listings (the same number as April). The spread of industries contracted slightly in the first half of 2018, with only 12 industry sectors represented, compared to 17 in the first half of However, the industries that were represented have in past years been well represented, which may indicate that the market is returning to what it knows best. In previous years, new listings have found it challenging to achieve full subscription targets. However, the results of 2018 indicate that the market continues to improve as witnessed in 2016 and Overall, 72% of the total subscriptions sought was raised, with 28 IPOs being either fully subscribed or oversubscribed. IPO Activity by Quarter 60 $9,000 Number of IPOs $8,000 $7,000 $6,000 $5,000 $4,000 $3,000 Raised ($m) 10 $2,000 $1,000 - Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun $- # of IPOs >$100m # of IPOs <$100m Raised ($m) Large Cap The IPO market in the first half of 2018 is performing well in comparison to previous years. The entrance of large cap listings is an indication that the market is gaining confidence. Great people, great results 1

4 Sector Analysis A few surprises in 2018 Sector Analysis All Listings Small Cap Only Industry Number Number Number Number Raised ($m) Raised ($m) Raised ($m) Raised ($m) Automobiles & Components Capital Goods Commercial Services & Supplies Commercial & Professional Services Consumer Services Diversified Financials Energy Food & Staples Retailing Food, Beverage & Tobacco Health Care Equipment & Services Household & Personal Products Investments 2 1, , Materials Media Pharmaceuticals, Biotechnology & Life Sciences Real Estate Retailing Software & Services Technology Hardware & Equipment Telecommunication Services Transportation Utilities Total 39 2, , ,146 A comparison of the first half of 2018 against the listings for the 2017 year by sector. In the years 2016 and 2017, the market experienced a transition within the small cap sector from technology stocks (being Technology, Biotech and Software & Services) to Materials stocks. This trend continued in 2018 and Materials was the strongest performer for the first half of the year with 14 new IPOs in the small cap sector (15 new listings in the first half of 2017). Materials represented 41% of all listings, however due to the size of the IPOs, this sector made up only 14% of total funds raised by small cap companies. The other partner in the resources stocks sector, Energy, did not record any listings in Whilst there were some predictions in the market that Pharmaceuticals, Biotechnology & Life Sciences would have another strong year (four new listings in 2017) on the back of medical marijuana businesses, there were no new listings in this sector in the first half of The spread across industries of new IPOs contracted marginally this year, going against the trend of the past few years. Only 12 industries were represented and, of these, nine of them were in the small cap sector. Interestingly, Food, Beverage & Tobacco, Health Care Equipment & Services and Household & Personal Products were all represented in the first half of these are sectors not usually listed in the small cap sector. Technology companies comprised the next largest sector group, with eight listings in the small cap sector (Software & Services: six listings, Technology Hardware & Equipment: one listing and Telecommunication Services: one listing). The small cap listings in the Health Care Equipment & Services and Diversified Financials sectors performed the best with respect to funds raised, with $35 million and $21.1 million raised respectively. Software & Services also performed well, with average funds raised of $18.8 million. When considering all companies which listed during the half year, the contribution of Investments stocks is more pronounced with 53% of the total market fundraising occurring within this sector ($1.3 billion). Diversified Financials also performed well with $650.7 million, or 26%, of the total funds raised. First-day gains were experienced in the share prices of seven out of 12 sectors, with Household & Personal Products (49%) the best performer, followed by Software & Services (35%). Food, Beverage & Tobacco (loss of 20%) and Telecommunication Services (loss of 15%) underperformed on the first day of trade. Household & Personal Products recorded the best share price performance through to June, with an average increase of 55%. Software & Services also performed well, with an average return of 38%. Materials recorded a modest 7% gain. Four sectors recorded losses of 20% or more, being Commercial Services & Supplies (43%), Telecommunication Services (30%), Retailing (26%) and Food, Beverage & Tobacco (20%). Materials was the strongest performer for the first half of the year. 2 hlb.com.au

5 IPO Subscription Rates Investors continue to support new listings Percentage of Subscription Target Achieved by Sector 100% Share of Companies 90% 80% 70% 60% 50% 40% 30% 20% 100% 40% 60% 100% 100% 50% 50% 50% 50% 75% 100% 100% 100% 100% In the first half of 2018, 72% of listings met their subscription targets, continuing the trend witnessed in 2016 and Target Not Achieved Target Achieved 10% 25% 0% The market continued to experience improved IPO subscription rates during the first six months of 2018, continuing on from 2016 and 2017 trends. A total of 28 listings (72%) met their subscription targets. The entire market raised $2.5 billion, which represents an oversubscription of 29%. This impressive result is largely due to L1 Long Short Fund Limited (ASX:LSF), which raised $1.3 billion after initially seeking $600 million. Excluding this outlier, the market raised, on average, 88% of funds sought. LSF s results disguised the performance of the large cap sector as a whole, which reached just 85% of its subscription targets Within the small cap sector, the best performing market capitalisation ranges were $0-10 million and $ million, with each bracket recording 100% of subscription targets. The $50-75 million bracket was also very close with 99%, with two out of the three listings in this bracket meeting or exceeding their targets. While only 11 out of 15 companies in the $10-25 million bracket met or exceeded their targets, overall this bracket achieved an average raising of 95%, further proving companies in this bracket are enjoying strong support from investors. In this buoyant market, even the worst performing sector ($25-50 million) achieved an average subscription rate of 93%. Materials stocks were mixed, with 12 of the 16 listings meeting their goals. Within the other sectors which had more than two listings, Diversified Financials had three of its five listings failing to meet subscription targets while all six companies in the Software & Services sector achieved full subscription. With respect to share price performance, those companies that met their subscription targets also significantly outperformed those that didn t. The 28 companies that achieved full subscription recorded average first-day gains of 20%, and were still up 16% by the end of June. This is in contrast to those companies that didn t meet their targets which, after experiencing modest openings (average first day gain of 6%), declined to finish the end of the first half of the year 21% down on their initial listing prices. 160% 140% Percentage % of Subscription of Subscription Target Achieved Target Achieved 135% It has been a strong start for the small cap market with most companies reaching subscription targets. 120% 100% 80% 60% 100% 95% 93% 99% 100% 40% 20% 0% 0 to to to to to Market Capitalisation at Listing ($m) Great people, great results 3

6 Resources Sector Analysis Strength and diversity The resources sector (comprising Materials and Energy companies) continues to perform strongly in the IPO market. With 16 listings in the first six months of the year, the sector is performing on par with the start to 2017, when there were 15 listings. Energy stocks, however, are yet to feature in New Materials listings are still enjoying support from the market, with an average of 98% of subscription rates achieved, which is similar to 2017 s subscription rates. Western Australia continues to dominate the resources listings, with 13 new listings. NSW, Queensland and Victoria all recorded one listing each. While the Eastern states are usually home to the larger resources listings, this has not been the case so far this year with only $28.1 million raised. Three states: Western Australia (+12%) NSW (+11%) and Queensland (+10%) all recorded gains to the end of June, with only Victoria finishing in the red. Gold featured heavily in the listings for the start of the year, with five companies solely focused on the precious metal. Another five polymetallic companies are also seeking gold. Copper and nickel were also popular, with six and five listings respectively. No other commodities recorded more than two listings, however the diversity of the market continues to grow with over 14 different resources sought. Coal, which for some time has struggled to gain traction in the market, recorded one listing. In 2017, there were no direct correlations identified between the commodities sought and the share price performance. This year the trend has continued, however those that listed in the second quarter performed better, on average, with six out of seven listings finishing June in the black. This is in contrast to seven of the nine listings in the first quarter of this year recording losses. This year s two best performers were Eagle Mountain Mining Limited (ASX:EM2) which recorded a gain of 110% (targeting copper and gold) and Adriatic Metals PLC (ASX:ADT) up 158% (targeting a number of different commodities). With another 11 listings in the pipeline for 2018, coupled with an outlook of strong commodity prices and solid share price performance, Materials IPOs are likely to remain strong performers for the remainder of the year. IPO by Commodity 1 Disclaimer: The ASX GICS codes in 2018 included one IPO as a Materials listing which was not directly involved in the mining, exploration or oil and gas industries. For the purposes of the analysis within this Mid-Year IPO Watch Report, this listing has been included within the respective sector as opposed to within Materials. With another 11 listings in the pipeline for 2018 coupled with an outlook of strong commodity prices and solid share price performance, Materials IPOs are likely to remain strong performers for the remainder of the year. Lead, 13% Diamonds, 6% Zinc, 13% Coal, 6% Silver, 13% Gold, 63% Barite, 6% Iron ore, 6% Manganese, 6% Graphite, 6% Nickel, 31% Cobalt, 13% Platinum, 6% Copper, 38% ¹ Includes data of IPOs seeking multiple commodities, therefore totals will exceed 100%. 4 hlb.com.au

7 The Road Ahead... It s good news for the market Small cap, junior exploration companies in the resources stocks sector, appear to be the strongest contributors to upcoming listings. As at the close of the market on 30 June 2018, 35 companies had applied to list on the ASX, of which 17 have a proposed listing date. These companies are seeking a combined total of $3.5 billion, which represents a significant improvement from the 2017 year (37 listings seeking $ million). This figure is significantly impacted by Viva Energy Group which subsequently listed in July raising $2.6 billion. Eleven of the proposed listings are in the Materials sector. Although these companies represent 31% of the listings, the amount sought ($52.95 million) represents just 1% of the total funds sought. Technology stocks (Technology, Biotech and Software & Services) show signs of improvement, with 11 proposed listings (seeking $188.5 million) as at 30 June Technology stock activity should be positive for the ASX, as these sectors are often comprised of larger companies. Overall there is a broader range of companies planning to list in 2018, with Real Estate, Food, Beverage & Tobacco and Capital Goods each having several listings in the pipeline. The annual IPO Watch Report is released in January and contains a commentary of all IPO activity for the calendar year. HLB Mann Judd s next annual IPO Watch Report will be released in January About HLB Mann Judd The HLB Mann Judd Australasian Association consists of nine member firms and three representative firms across Australia, New Zealand and Fiji. It represents a group of specialists providing business advice and services to a wide range of business organisations and private clients. As members of HLB International, HLB Mann Judd firms are part of a world-wide network of respected accounting firms with more than 700 offices in over 150 countries. We are ranked in the top 12 largest accounting and business advisory groups world-wide. Through this international network we obtain the benefit of HLB s global experience and provide our clients with access to professional expertise throughout the world. HLB Mann Judd firms offer a comprehensive range of professional services to listed clients and companies pursuing an IPO. In addition to acting as corporate advisers, investigating accountants, and tax and accounting advisers, we have extensive experience in assisting clients in their preparation for an IPO and in evaluating the benefits and feasibility of an IPO against alternative strategic options. Our assistance to companies pursuing an IPO typically includes: Investigating accountant s reports on historical and forecast financial information Independent expert s reports Analysis and advice on feasibility and alternatives to an IPO Pre-IPO diagnostic review Corporate and structuring advice Financial and taxation due diligence Valuations Company and shareholder tax advice and planning Accounting advice. Great people, great results 5

8 IPO Watch Australia - Mid-Year Report A Snapshot of Australian IPO Activity for the first half of 2018 Member Firms Adelaide Tel mailbox@hlbsa.com.au Auckland Tel hlb@hlb.co.nz Brisbane Tel mailbox@hlbqld.com.au Melbourne Tel mailbox@hlbvic.com.au Nadi (Fiji) Tel harun@hlbnadi.com.fj Perth Tel mailbox@hlbwa.com.au Perth (Insolvency WA) Tel kwallman@hlbinsol.com.au Sydney Tel mailbox@hlbnsw.com.au Wollongong Tel mailbox@hlbw.com.au Representative Firms Hobart Lorkin Delpero Harris Tel mail@ldh.com.au Lismore Thomas Noble and Russell Tel enquiries@tnr.com.au Newcastle Cutcher & Neale Tel nmail@cutcher.com.au The HLB Mann Judd Australasian Association is an independent network of accounting firms, business and financial advisers with offices throughout Australia, New Zealand and Fiji. Each member firm is separately owned and managed and has no liability for the acts and omissions of any other member firm. Not all services listed in this brochure are provided by all member firms. HLB Mann Judd firms are part of HLB International, a world-wide network of independent accounting firms and business advisers HLB Mann Judd Australasian Association linkedin.com/company/hlb-mann-judd twitter.com/hlbmannjudd hlb.com.au