Orion Health IPO price at top of range

Orion Health Group has just announced a final price of $5.70 a share for shares in its upcoming initial public offering following yesterday’s institutional bookbuild.

The final price for the healthcare software company is at the top of the indicative price range, which was set at $4.30 to $5.70 per share. This means Orion will have a market capitalisation of about $915 million upon listing.

The final offer size has been set at $125 million, of which $120 million is new capital to fund Orion’s research and development capacity, improve its delivery to customers and provide more financial liquidity.

The broker offer opens on Monday and is expected to close at 5pm on November 21. Shares are expected to start trading on the NZX main board and ASX on November 26 under the stock code OHE.

Joint lead managers for the offer are Deutsche Craigs and First NZ Capital, and there is no public pool. 

NBR ONLINE understands demand for the stock was well in excess of supply, with some bidding brokers unable to obtain more than 10-15% of shares requested.

Orion’s revenue grew to $153 million in the year ended March 31 and, while it has been profitable in the past, it’s not currently because it is reinvesting most of its cashflow back into global expansion.

The company is forecast to post a loss of $14.8 million in the six months ended September 30, 2014 on sales of $80.5 million.

Annualised recurring revenue is expected to rise to $52.1 million in the first half of the 2015 year from $44.2 million as at March 31.

"The board has held the view that $120 million of new capital is the right amount for the business and it was a tough decision not to increase the size of the offer in the face of such overwhelming demand at the top of the price range," chairman Andrew Ferrier said. "We look forward to welcome over 20 domestic and offshore institutions and New Zealand retail investors as shareholders in Orion Health," the company said in a statement released at midday.

Orion didn't provide earnings forecast in its prospectus because of the "lumpy" nature of the group's revenues for fear of misleading investors. The funds raised will be used to double the existing 40 research and development teams to accelerate its existing solutions and to undertake blue sky research on its big data analytics and predictive modelling software. The money will also go to improve implementation and delivery capability, and provide additional financial liquidity.

Orion had an annualised growth rate of 26 percent over the past 10 years, according to its offer documents. It posted a loss of $14.8 million in the six months ended Sept. 30, 2014 on sales of $80.5 million which Ferrier said had been planned for. Annualised recurring revenue, the favoured sales measure of software as a service firms, rose to $52.1 million in the first half of the 2015 year from $44.2 million as at March 31. It currently accounts for 29 percent of revenue and is forecast to reach 50 percent within five years.