SA’s Alexander Forbes surges above IPO price

By Tiisetso Motsoeneng and David Dolan

JOHANNESBURG (Reuters) – Shares in Alexander Forbes surged 12 percent on their return to the Johannesburg bourse on Thursday, valuing the retirement fund manager at almost $1 billion as it dazzled investors with the prospect of steady earnings and growth across Africa.

The company, which was taken private by a group of investors led by buyout firm Actis in 2007, returned to the bourse after a 3.7 billion rand ($353 million) public offering last week, South Africa's largest flotation in four years.

Investors were drawn by the regular income from its pension management and insurance businesses, and the potential for growth in sub-Saharan Africa where financial services are still developing.

"It's a solid company that's making decent profit on a regular basis and it has sizeable assets under its management," said Petri Redelinghys, a trader at Inkunzi Investments in Johannesburg.

"I'm actually a buyer of the stock, but it's run so hard so quickly that I think a little bit of patience might be the way to go."

Alexander Forbes has said it may pay out as much as 67 percent of its earnings as dividends.

The shares first traded at 8.10 rand, compared with the initial public offer (IPO) price of 7.50 rand. By 1100 GMT the shares were trading at 8.40 rand, valuing the firm at nearly 11 billion rand ($1 billion).

The price is around 11 times the firm's trading profit per share for the 2014 financial year, according to Reuters calculations.

Alexander Forbes said this month it was looking to expand its presence in sub-Saharan Africa. It already provides retirement planning and insurance services in several African countries such as Namibia, Botswana, Kenya andNigeria.

Following the listing, Marsh & McLennan, the world's top insurance broker, is due to become Alexander Forbes' biggest shareholder with a 34 percent stake.

Marsh is due to buy the stake in two tranches starting with 14.9 percent at the listing and the rest shortly after.

The listing follows the biggest Johannesburg flotation since Royal Bafokeng Platinum's 2010 IPO, according to Thomson Reuters data.

In dollar terms, Alexander Forbes' public offering is South Africa's seventh-largest IPO on record. It also allowed a group of investors led by London-based private equity firm Actis to exit the company in a buoyant market.

The Actis-led group took the company private in an 8.2 billion rand deal seven years ago, just before the global financial crisis. Since then the South African equity market has recovered to post a chain record highs this year.

($1 = 10.5423 South African Rand)