JSE woos ICT firms

SA's bourse, the JSE, is going all out this year to attract "sexy" ICT companies to its boards.

Noah Greenhill, GM of marketing and business development at the JSE, says the exchange is "going to be more creative to attract more companies in specific sectors, including ICT".

As part of this plan, the JSE intends having a presence at the Futurex & Equip exhibition in Sandton later this year in a bid to woo ICT companies to the bourse.

The pipeline of companies aiming to list "looks good", says Greenhill, with ICT companies on that list. He expects to more than beat the number of listings that took place last year, especially as the JSE aggressively markets itself to ICT firms.

Out of the 12 000 ICT companies in SA, about 50 are listed on the bourse. Only the baby bourse - the Alternative Exchange (AltX) - saw ICT listings last year, says Greenhill. This is something the bourse aims to change, hoping to attract larger companies to the main board.

Greenhill sees more companies listing on the smaller bourse this year, but says the exchange aims to attract larger companies, arguing that Business Connexion would not be the takeover target it is today were it not listed.

"ICT has been an interesting focus for us." The bourse has seen some interesting developments in that sector, he says.

Greenhill highlights changing trends in the bourse's showcases - mini show-and-tell days for companies to present to investors - as an example. "More small and medium companies are participating."

He adds that companies are seeing the benefits of listing, with the status opening up business opportunities, encouraging other listings in the sector.

ICT companies are also showing "slow, steady growth", nowhere near that seen just before the dot-com bubble burst. "The ICT sector is a sexy sector."

Despite this, Greenhill says the ripple effect after the boom-and-bust time at the turn of the century persists and many investors are concerned about investing in ICT companies in case they fail. This is a "myth" the JSE aims to debunk.

"We are trying hard not to repeat the 1997 hot initial public offering period. The more we perpetuate the myth about the bubble, the more we constrain growth and potential for ICT companies."

Companies listing currently are quality firms that have strict regulatory processes: "We are seeing quality companies, we are not seeing fly-by night entities."

Overall, local ICT firms are expected to have a good year. ICT companies listed on the JSE's main board have seen their share prices tick up recently on the back of good fundamentals and can no longer be viewed as bargain buys, comments an analyst.

While companies are not "massively expensive", there is not much surplus value to be had, he says, in comparison to share prices at the same time a year ago. This year has already seen the JSE hit an all-time record in its all share value.

Most shares are trading at either fair value, or just below that, he says. A year ago, JSE-listed ICT firms were trading at a 30% to 40% discount on fair value.

"The economy is doing well, and companies need to spend on their IT systems, so the outlook is solid."

Companies that have seen share price increases since listing on AltX include Simeka BSG, which listed in August 2004 at 50c and closed on the first day at 58c. Its share price has increased 45% since then and closed on 7 January at 84c. DataPro, which listed in October the same year at 64c and closed down at 59c on the first day's trade, has seen a 49% increase.

Alliance Data Corporation, listing at R1 in March 2005 and closing at R1.30, has seen a 142% increase in its share price up to 7 January. Celcom has lost a percent in its share price, closing at R1.10 on listing in November last year and closing at R1.09 on 7 January.

The Dialogue Group, which listed last September at R1, has gained 50% to trade at around R1.50.

Silverbridge, a software firm, listed last November at R2, and has lost 41% of its opening close price of R3.40.

African Cellular Towers moved marginally up from its opening close of R1.20 in November to R1.23, a 3% gain.

SAB & T Ubuntu - the JSE's first listing of a professional services firm - closed the first day at 45c and lost 22% to close on 7 January at 35c. IFCA has also moved down, by 9%.

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