Can you be sure of Esure?

It is often the sign of a bull market that you see more IPO's coming to the market. Yesterday was the final day for anyone interested in buying shares in Insurance company Esure to register their interest.

Insurance firm esure has set a price range of 240p to 310p per share ahead of its much-anticipated London initial public offering.

The mid-point values the company - founded and chaired by Peter Wood, one of Britain's wealthiest entrepreneurs - at £1.1bn.

The home and motor insurer said it would repay "all of esure's outstanding debt" with the £50m it hopes to raise from the sale of new shares.

http://news.sky.com/story/1061865/esure-sets-price-range-ahead-of-flotation

There is talk that the starting price will be around the 270p mark, which if true puts it on a dividend yield of around 6% and prospective P/E of around 10, lower than its market peers. The last big insurance company to float was Direct Line, which also offered a yield of around 6%. There were doubts about Direct Line, but since the IPO the share price has been a steady riser, although the bull run recently should have helped it. Chances are Esure could also be a steady performer, at least while markets are good, and the prospective yield does look good for income seekers at a time of low IR's for savings on cash.

IPO's though seem to be back in fashion, as we also have estate agent Countrywide coming to market this week as well.

Britain's biggest estate agent, Countrywide, is poised to sell its shares in an initial public offering on Wednesday at the highest possible price it had planned for, in a further sign that the UK housing market is gaining momentum.

The company is preparing to offer its shares at the top end of the range – 330p to 350p a share, up from an initial 260p-350p – two unnamed sources told Reuters.

http://www.guardian.co.uk/business/2013/mar/18/countrywide-flotation-optimism-housing-market

Not sure about that UK housing market momentum, but it's perhaps typical of an estate agent it wants the highest price possible at float, so not as attractive for income seekers as Esure.


Another float is green energy company Greencoat UK Wind.

Green investment in its current form here in the UK seems to involve a lot of risk without the compensatory rewards. Lack of funding, and some woefully poor execution, has left the junior market littered with failures.

So much so that investors have become rather jaded and cynical about the sector. Going against type is Greencoat UK Wind, which is preparing to list next month.

Britain’s first ever green infrastructure fund, it has been set up as a yield play with the funding and development risk removed.

http://www.thisismoney.co.uk/money/markets/article-2283060/Greencoat-UK-Wind-IPO-Strong-demand-expected-float-unique-green-fund.html

Guaranteed green subsidies make the dividend attractive at around 6%.

Guaranteed green subsidies and offtake agreements with utilities will generate the cash to pay a 6p-in-the-pound dividend (around three times the 10-year gilt yields). And there will be enough left to re-invest to grow the company’s net asset value in real terms.

The kicker to Greencoat is the dividend will track the retail price index – which marks it out from others in the sector such as the John Laing and 3i infrastructure funds.

So, while some of these IPO's may well be attractive, especially for income seekers, they are coming to the market during a very bullish phase. We could ask the question is the willingness to float the sign of a top, or just a positive reaction that the worst is over? Of course, those at the top of the float will be rewarded handsomely for coming to the market, hopefully investors who buy in won't be short changed by a market top.

Update: Countrywide IPO has been set at 350p, so an Estate Agent looking for the top price possible.