AFG has rocky start in share market debut

by Julia Corderoy26 May 2015
AFG had a rocky start in its share market debut amid reservations about banks tightening mortgage lending standards.

When the aggregator announced it lodged a prospectus with ASIC for an IPO on the Australian Securities Exchange in early May, it said its IPO was expected to raise between $121.3m and $140.1m, based on a price range of $1.20 to $1.38 per share.

However, when shares in the company started trading on the Australian Securities Exchange on Friday, the Australian Financial Review reported that they only fetched $1.18 – a 1.2% discount to their $1.20 offer price. But the stock recovered to close its first session bang-on the lower end of its offer price, at $1.20.

According to the AFR, AFG’s rocky share market debut was due to APRA’s crackdown on mortgage lending, in particular investor lending, in response to a recommendation from the financial system inquiry which said big banks should have to hold a bigger capital buffer against their mortgage books.

Since Friday, a number of lenders have announced they will be capping LVR limits on investor loans or cutting discounts and other special offers extended to brokers on investment loans, in response to fears about an over-heated property market and risky lending standards including the major banks. 

In its prospectus however, AFG forecasts its pro forma net profit after tax to increase 10.6% this financial year to $17.8 million, and a further 10.7% to $19.7 million by the end of the 2016 financial year.