Orion shares surge on NZX debut

LATEST: Ian McCrae maps his genome, plans taking Orion to next level

UPDATED: Shares of Orion Health Group [NZX: OHE], the healthcare management software developer, climbed as much as 19 percent on its NZX debut as investors looked to top-up their holdings after scaling in the initial public offer saw them get less than they wanted.

The stock rose as high as $6.79 from its $5.70 offer price, and recently traded at $6.60, valuing the company at $1.06 billion. There was no public pool for the offer which saw 21.1 million new shares raise $120 million in new capital to fund development. Chief executive and founder Ian McCrae sold a further $5 million, or 880,000 shares, into the float. Existing shareholders hung onto about 86 percent of Orion, with McCrae keeping a 50 percent stake.

"It's been a very successful listing," Bryon Burke, head of equities at Craigs Investment Partners, which managed the float, told BusinessDesk. "Both retail and institutional investors have looked to top up their holdings from their initial allocations which were scaled back and that's pushed the share price a dollar higher than it's offer price."

Orion will use the new funds to double the existing 40 research and development teams to accelerate its existing software 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 Health is already at the forefront with solutions that are delivering benefits to our 450 customers across 25 countries," McCrae said in a statement. "We are now funded to significantly increase our research and development efforts to expand our capability and solutions for customers and I am very excited that many of these great new roles will be in the New Zealand IT sector."

Investor appetite for the stock wasn't fuelled by yield as the company isn't paying dividends yet, said Craigs' Burke.

"People quite like the penetration they have with their product and see the growth there," Burke said. "It's a growth story and New Zealand market doesn't have a lot of ways into that sector so it's a good addition to the New Zealand market. It's quite good to see New Zealand support a stock which doesn't have a dividend, which is a little bit unusual."

The company is also listing on the ASX today, although Burke thought the bulk of the stock was registered in New Zealand.

Orion didn't provide earnings forecast in its prospectus because of the "lumpy" nature of the group's revenues for fear of misleading investors. 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. The company isn't paying dividends.

Telstra Health, a unit of Australia's largest telecommunications business Telstra Corp, which spent $20 million for a 2 percent stake in the book build. Telstra Health was among 20 institutional investors who bought into the company during its initial public offer.

The Telstra business links patients with medical records, doctors and health services and use its network to transfer data and provide tele or video conferencing, particularly to the elderly or those in remote area. The push into Australia's A$120 billion health sector is part of the telecommunication company's plan to widen its offerings beyond its bread-and-butter telecommunications and generate new income.

Deutsche Craigs and First NZ Capital were joint lead managers in the offer.

(BusinessDesk)

BusinessDesk receives funding to help cover the commercialisation of innovation from Callaghan Innovation.