Stockbrokers hail successful APS listing as ‘milestone’ for local capital market

Three of Malta’s leading stockbrokers have welcomed the enthusiasm shown for local bank APS’s initial pubic offering (IPO), saying that it reflects the company’s “excellent” fundamentals.

APS’s stock offering opened on Friday morning and closed on the same day, at 3pm, having sold the 100 million shares (plus 10 million in case of oversubscription, as is the case here) at an issue price of €0.62 per share in mere hours.

According to the bank’s CEO, Marcel Cassar, who addressed the public immediately after the listing was closed, the IPO raised over €80 million in new equity capial.

He said the bank acknowledges that investment conditions remain challenging, and that the size of the offer was not small, nonetheless, he thanked all those involved.

BusinessNow.mt reached out to some of Malta’s most prominent stockbrokers to get their reaction to the news.

RizzoFarrugia director Edward Rizzo admits that although the share issue was expected to be positively received – pointing to the placement of €41.4 million by anchor investors as testament to this – the extent of the demand by “a very large cross-section of the retail investing community” in such a short period of time “is possibly the biggest surprise”.

Jesmond Mizzi, managing director of Jesmond Mizzi Financial Advisors, similarly noted that 70 per cent of the IPO was sold at pre-placement stage. “This is good news for Borza [as the Malta Stock Exchange is known] and I hope that the equity will continue to attract investors once the shares are listed. It would be interesting to see if this demand will continue going forward.”

The rapid take-up and enthusiasm for APS shares may also spell good news for the economy, as along with Malta’s anticipated removal from the Financial Action Task Force (FATF) grey list and the recovery in performance by many companies following the lifting of restrictions related to the pandemic, it points to a strong recovery.

“This should lead to more positive returns for the Maltese equity market,” says Mr Rizzo, “which in turn would generate more active interest by retail and institutional investors.”

He points out that the APS share issue is the largest equity fund raise since the Maltacom (now GO plc) privatisation in 1998, “so this is indeed a milestone for the local capital market, especially when this comes in the midst of the very challenging economic conditions being encountered locally and internationally”.

However, not all recent local IPOs were as successful, with a trio of real estate-related offerings receiving a far more muted response. Valletta real estate company company VBL ended up selling fewer shares than it expected, as did Hili Properties, while AX Real Estate had to extend its offer period.

In fact, Paul Bonello, managing director of Finco Treasury Management, describes some recent IPOs as “half baked”.

What, then, made APS so successful?

For Mr Bonello, part of the reason is the fall from favour of BOV and HSBC, the country’s two largest banks and long a haven for investors’ money.

“The top two banks’ profitability is expected to go further south,” he says, “whereas the trajectory of banks like APS, and I’ll include BNF here too, is going upwards. They are obviously taking the cream from BOV’s and HSBC’s business, and the market is recognising that. APS is achieving success right now, whereas for the big two, the news is always negative and dull, with one always closing down branches and activities, and the other embroiled in one scandal after another.”

Mr Rizzo similarly argues that in the earlier years of Malta’s capital market, the two largest banks were among the darling stocks for local investors as they produced spectacular returns.

“However, for various reasons, the share price performance and dividend returns over recent years by both these banks was very disappointing. In the midst of this, the recent positive financial track record and growing market share of APS Bank coupled with its excellent brand name are surely some features that APS was so well-received.”

APS’s track record was also highlighted by Mr Mizzi, who described it as a great advantage: “The bank has over the years continued to grow rapidly and their financial results have been good. notwithstanding the pandemic and other events. The bank also has a large client base which has surely helped the success of the IPO.”

Asked whether local investors might have seen APS shares as a more secure option when compared to the volatile market abroad, Mr Mizzi opts to retain focus on APS’ success as its own.

“Whether it is a safe bet will be established in the years to come; but it will obviously depend on the growth of the bank, the dividend policy, new capital injections and the activity on the secondary market,” he says, adding that investors familiarity with the bank presented a good opportunity for investment in the local market.

He also notes that the demand for local new bond issues is still strong, and says he hopes that more issuers will be encouraged by the success of this issue.

Mr Bonello meanwhile expresses his belief that international events had little bearing on the rapid take-up of APS shares. “Most Maltese clients are oblivious to the fact overseas markets exist,” he says. “They like to keep their investments local. So Maltese investors who like investing in Maltese securities found comfort in APS. And, I believe, rightly so.”

This confidence in APS was also shared by Mr Rizzo, who says that although the challenging economic conditions and intense volatility across the international financial markets “may have partially contributed to the success in the APS share issue, the positive track record to date and the strong brand values of APS are undoubtedly the main factors that led to the strong take-up”.

“APS Bank has become synonymous with many of the traditional values that historically underpinned the banking sector in Malta – those that promote excellence, authenticity, compassion, and support towards the creation of wealth and sound business.”