Business news can be seasonally quiet in June with companies approaching reporting blackout. Investors do however get to enjoy a fresh round of IPO's eager to attract their hard-earned capital.
We like to look long and hard at these opportunities, as they present a uniquely inefficient pricing window for a number of reasons including:
- The companies have little public track record;
- Limited investor knowledge;
- Scarce research;
- (Most importantly) No market pricing.
This creates significant opportunity (and risk) for those willing to play the game, and it is through this process that we identified Afterpay early on (as we outlined here).
Here we look at 5 of these new listings that we think are worth having a closer look at.
This Perth-based project design and construction company has been a great success story since its formation in 2011. Whilst it has thrived with industry tailwinds, its success can be attributed to a driven management team that has attracted a blue-chip client base to its books.
A valuation of just under $60m puts Primero right at the deep value end of the market with an FY18f NPAT of $5.4m, but this industry is renowned for extreme swings in profitability. $25m raise ($5m sell down, $20m new capital.)
This vertically integrated industrial product manufacturer produces unique forms of magnesium hydroxide that can be used for a range of purposes such as wastewater treatment, corrosion protection and crop protection.
Formative product revenues ($3m+ in FY18) and build out of new business should see positive news flow in this company’s early days as a listed entity. Proposed $8m raise on $65m market cap.
I won’t give this business any credit for its new name, but consumers would previously have known this company as Acorns, the micro investing application. With over 155t customers and $170m in funds under management, this business is hoping for a step-change as it starts to offer a superannuation solution.
A $15m raise on a valuation of almost $120m looks pricey, given their modest revenue, but the brand equity and scalability of their product might well attract investor interest.
Like Acorns, Australian consumers would likely be aware of the home food service offering, Marley Spoon. This is a global business with over 100,000 customers in Australia, Europe and the US (known as Martha & Marley Spoon).
Forecast revenues in FY18 of $140m belie the underlying costs of operations with a forecast loss of almost $40m. Raising $70m in fresh capital for a market cap of $163m seems reasonable for a global business, but its scalability to cash-flow break-even is the pinch point.
This US-based scientific development business provides gas flow controllers for semiconductor manufacturers such as Intel, Samsung and Hitachi.
Whilst it requires a leap of faith to fully appreciate the competitive advantage of the tech, Pivotal's attractive market position and growing revenues of US$30m in FY18, up from US$8m in FY16 certainly provide comfort. A$56m raise ($20m sell down, $36m new capital) on a valuation of A$200m.
Cyan is making meaningful investments in some of the most promising (and often overlooked) smaller companies listed on the ASX today. Find out how.
None of these appear to be worth buying. It is a shame buyers allow the IPO's to be way overpriced - at ridiculously high multiples, with some of these companies unlikely to survive for very long. Where is ASIC?