MYR Myer Holdings Limited

Australia's largest initial public offering this year, Collins Foods Ltd. (CKF.AU), fell 8% in its first day of trading, a sign the domestic market for new listings is still struggling to find its footing.

Collins Foods, an operator and franchiser of Sizzler restaurants globally and KFC outlets in Australia, was the first sizable deal to come to the Australian market after a succession of deals were pulled.

It began trading on a dismal day Thursday, when the benchmark S&P/ASX 200 index closed down 1.3% near 13-month lows. The company's stock, which priced at A$2.50, opened 2 cents lower and closed down 8% at A$2.30 giving it a market capitalization of A$213.9 million.

"Because the secondary market is under pressure, it's very hard for IPOs to outperform," said Naz Ressas, a portfolio manager at Colonial First State, who didn't participate in the deal.

"The market's looking for new ideas but the ask between the seller and the buyer is still wide, that's what's holding back a lot of quality IPOs from coming in," he said.

"The vendors know their IPOs are worth more but they're not going to get it in the secondary market. The IPOs are competing against a very cheap secondary market," Ressas added.

The fall in Collins Foods' share price comes after the stock priced at the low end of its range, which was A$2.50 to A$2.92.

The very completion of the IPO was a rare bright spot in the local market for new floats. The recent offering of hard-rock mining contractor Barminco Ltd. was pulled due to market volatility. In late May, the owners of portable building manufacturer Ausco Modular Pty. Ltd. decided to sell the company to a private equity firm rather than pursue a float because they didn't think they could raise as much in the public market as they could through that sale. In April, the potential IPO or trade sale of lingerie retailer Bras N Things was put on hold because the vendors didn't think they'd be able to achieve a desirable sale price for the asset.

Retailers have been reluctant to attempt IPOs over the past year given the slow recovery in consumer spending in Australia, coupled with the legacy of the disappointing float of department store Myer Holdings Ltd. (MYR.AU) in late 2009. Many of the assets in private equity hands that could be potential IPO candidates are exposed to the retail sector.

Thus far this year, US$560 million of IPOs have come to the market, an increase from this time last year, but the volume of IPOs year-to-date over the past three years has been anemic compared to the activity that was taking place before the financial crisis took hold, Dealogic data reveals.

With the U.S. economy recently showing signs of stalling and sovereign debt issues in Europe yet to be resolved, the Australian share market could be volatile for some time to come, which could in turn hurt the prospects for IPOs locally.

"Bear markets are no fun," Ressas said.

-By Cynthia Koons; Dow Jones Newswires; +61-2-8272-4691; cynthia.koons@dowjones.com

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