After a slow start during which no company listed for three months, the exchange went on to secure 10 listings in 2004, seven in 2005, 23 in 2006 and 38 in 2007. With a smattering of delistings and moves to the main board, AltX recently breached the level of 74 listed companies. The buoyant activity in the construction industry is reflected in the fact that 12 of the recent listings were construction or related companies.
AltX aims to attract small and medium sized companies, and is also tailored more to the private investor than the institution, though institutions still account for 30% to 40% of market capitalisation.
It’s not often an individual can make a personal difference to the economy, but Noah Greenhill, manager of AltX and business development manager of the JSE, has done just that. Many analysts attribute the success of AltX to his personal dynamism and persistence – he in turn attributes it to the efforts of the business development team at the JSE.
Before joining the JSE, Greenhill was an entrepreneur developing a system to automate the trading of unlisted shares. When the joint venture fell through, the JSE expressed interest. It took three years of researching similar markets around the world before AltX became a reality.
According to research published by Ernst & Young, the volume of initial public offerings (IPOs) on the JSE surged 200% in the third quarter of 2007, buoyed by the construction sector boom. It has since accelerated.
Rules governing AltX firms are more robust than those in place during the dotcom boom in the 1990s, and some argue the risk on AltX is no greater than that of the JSE main board.
Nerina Visser, a quantitative strategist at Nedcor Securities, says the quality of companies listing on AltX today is superior to the last listings boom. Most of the companies listing are established and family-owned businesses, using the current favourable conditions to raise capital for expansion, or realise a stake in a family business.
“In contrast, many of the IPOs in the late 90s were new companies and ventures with no track record. At the same time, investors are undoubtedly more sophisticated than before and capable of doing their own research,” says Visser. She expects to see more notable success stories from the current listings than failures.
Stanlib analyst Anthony Sher agrees: “These are high quality companies with balance sheets mostly superior to what we saw in the late 90s. They are not as geared, and interest rates are not as high.”
The primary reason for the difference in quality, he says, is the robustness of the listing process applied by the AltX listings committee. The entry criteria are significantly higher than a few years ago, says Sher.
He believes the greatest investment opportunity for private investors is the construction and infrastructure sector of AltX. Companies such as Esor, WG Wearne and Robex are particular success stories, with WG Wearne being a 100-year old firm. The market cap of some AltX companies has grown dramatically since listing.
“It is very satisfying to see companies like Africa Dawn growing from R8 million capitalisation to R500 million in just over two years. It is satisfying to make a difference – what we’re doing at AltX is making millionaires and creating jobs in South Africa,” says Greenhill.
His vision for the exchange is that it ultimately becomes home to more companies than the main board. “This would reflect the economy, where there are more SMBs than large companies. It is attainable.”
For more information, contact +27 861 00 ALTX or visit www.altx.co.za