Best and Worst IPOs of 2018 Give Hints for Aston Martin Sale

(Bloomberg) -- We’re entering a busy IPO season and investors are curious which companies have the best chance of becoming market darlings.

Aston Martin and Knorr-Bremse sales are roaring ahead, and pot stocks are hot, so Canaccord Genuity expects Europe to see its share of cannabis listings. But let’s face it: this hasn’t been the best year for European stock markets, which have been pummeled by concerns over trade, politics and growth.

European IPOs have raised about $37 billion in 2018 so far, compared with about $44 billion in the same period last year, data compiled by Bloomberg show. The fourth quarter is the last chance for companies to enter the market this year, before any unpleasant surprises materialize in 2019. This year’s best IPO success stories signal that tech is still king, while real-estate and financials aren’t having the best time.

Here’s a look at this year’s best and worst performers of European company IPOs above $250 million:

Best and Worst IPOs of 2018 Give Hints for Aston Martin Sale

THE BEST

1. Adyen +195% (first trading day: June 13)

The fintech company has been the region’s top success story in 2018. After paring gains in September when some original backers sold their shares, the stock has resumed its spectacular advance.

But Bloomberg Intelligence’s David Ritter warns that although the company’s client list is “impressive,” its valuation is “hard to justify.” And Citigroup Inc.’s Josh Levin concurs, saying that while Adyen remains one of the best stories in the payments sector, he doesn’t see much upside from current levels.

2. Sensirion +85% (first trading day: March 22)

The manufacturer of digital micro sensors and systems said on Aug. 22 that IPO-related costs and share program for employees resulted in a net loss of 2 million Swiss francs in the first half. Sensirion expects a full-year adjusted Ebitda margin of as much as 16 percent.

3. Netcompany +48% (first trading day: June 7)

Morgan Stanley analysts said in September that their survey of chief information officers signaled the best demand for software in over a decade and highlighted Netcompany, the Danish IT solutions provider, as having “less demanding multiples.”

Deutsche Bank AG analyst Alex Tout said in an August note that the company’s full-year guidance was “slightly disappointing,” with an adjusted EBITA margin seen at the low end of 24.5 percent to 27.5 percent range, and FX a negative drag on margins. Netcompany said that using freelancers to deliver growth in Denmark and Norway in addition to higher than expected growth in the U.K., dilutes margins expected for the full year.

4. Elkem +41% (first trading day: March 22)

Norway’s biggest IPO since 2010, Elkem is one of the world’s largest silicones suppliers. Chief Executive Officer Helge Aasen said in a September interview that the company is pushing to grow its top-line through capacity expansion and acquisitions. Aasen said Elkem is looking at possible brownfield expansion in China as the next big project.

5. Carel Industries +36% (first trading day: June 11)

The Padova, Italy-based designer and manufacturer of control solutions for humidification systems offers a 29 percent return on equity and is trading at 26 times forward earnings. This compares with the industry average of about 17 times earnings.

THE WORST

1. Ceva Logistics -32% (first trading day: May 4)

The Baar, Switzerland-based transportation and logistics services provider now has the tools to consider acquisitions to increase market share, and the firm is targeting growth in Asia and Europe, CEO Xavier Urbain said in an interview in July. In July’s second-quarter earnings, the company said there has been limited impact on volumes from tariffs thus far.

Deutsche Bank said in an August note that while European freight forwarders have more limited exposure to the China-U.S. trade spat, management teams have signaled that this year’s peak season won’t be as strong as last year’s. Credit Suisse on Sept. 6 updated its forecasts for Ceva to reflect weakness in emerging market currencies, given significant exposure to Turkey and Brazil.

The stock has three buy and one neutral recommendation, according to analysts tracked by Bloomberg.

2. Metrovacesa -29% (first trading day: Feb. 6)

The Spanish real estate developer has slumped since its first day of trading in February, leading to a temporary share buyback plan in August. Metrovacesa was a symbol of Spain’s real estate bubble that burst in 2009. Now, there’s hope of a recovery for the century-old developer: low unemployment and a fifth year of economic recovery are spurring demand for housing, and the company has enough land to build about 37,500 homes across Spain.

3. DWS Group -27% (first trading day: March 23)

Deutsche Bank AG’s main asset-management arm said in July it will probably miss its target of bringing in 3 percent to 5 percent in net new money this year, after suffering 12.6 billion euros of investor outflows in the first two quarters. Cisco Systems pulled about 5 billion euros from DWS Group in recent quarters as it repatriated profits under the U.S. tax reform agreed last year, according to two people with knowledge of the matter.

4. Godewind -12% (first trading day: April 5)

The Hamburg-based property management company debuted in Frankfurt below its IPO price in April and the stock has since declined further. The stock has a 0.4 percent return on equity. The company reported a loss of 5.5 million euros for the first half.

5. Amigo Holdings -10% (first trading day: June 29)

The London-listed company, which offers unsecured guarantor loans, is eligible for potential inclusion in the FTSE 250, the index provider said in early September. Amigo said first-quarter revenue rose 47 percent from the previous year, and its impairment charge was slightly better than previous guidance.

Numis analysts said the impairment as well as IPO-related expenses ate into the company’s after-tax profit in the first quarter, but that the firm continues to show “strong” loan-book growth. RBC Capital Markets analyst Robert Noble attributed the stock’s decline partly to the resignation of the founder, James Benamor, as a non-executive director from the board, but said the financial appeal of the business remains the same.

The stock has four buy ratings, according to data compiled by Bloomberg.

©2018 Bloomberg L.P.