Part of the article in The Australian Wed 5/8/09In downturns,...

Part of the article in The Australian Wed 5/8/09

In downturns, small caps generally fall faster than larger stocks.

But they also come back much faster when markets rise, provided they have a sound financial position.

The best performing IPO in 2008-09 was iron ore and base metals explorer Emergent Resources, which, after listing in August last year, ended the financial year at a 150 per cent premium to its 20c issue price.

Resources stocks are cyclical, therefore if you believe the market is moving into a cyclical phase -- which many analysts do -- they could provide a good opportunity for participating in an IPO this year.

Emergent managing director Garry Hemming puts the Perth-based company's success in its first year of trading on the ASX down to the market's appetite for relatively small iron ore producers and the fact management stayed true to the prospectus. "It has not been easy -- at one point our shares were down to 4c -- but then we got stuck into the drilling of the iron ore project as well as doing a heap of work on the base metal properties; and (because) we were doing what we said we were going to do -- which was spend money on explorations -- we actually got support from a number of brokers," Hemming says.

HLB Mann Judd corporate finance director Geoff Webster says the beauty of a company such as Emergent is that it is operating in a sector that is viewed conservatively by underwriters at present.

"They are in a market where there is a great degree of difficulty in getting floats underwritten and therefore you have to have a very good, solid story," he says.

"So these people would have done their homework very well and they will have prepared for this knowing the risks involved."