IPO pipeline is hotting up

The IPO pipeline has hotted up again with a raft of new floats, of varying size and quality, coming across our desk in recent weeks. Typically we are extremely wary of early stage aggregation plays but the OC Funds investment team was particularly impressed with upcoming Baillieu float QMS. QMS is an owner and operator of a growing portfolio of static and digital assets in the outdoor advertising space, with operations in Australia, New Zealand and Indonesia. The key features of the company that attract us include: a) high quality management team with a proven track record in the industry; b) strong underlying category growth underpinned by a structural shift from static to digital billboards; c) quality asset base under long term agreements (average contract term 13 years); and d) demonstrated ability to commercialise new outdoor advertising assets. The indicative PE of just under 11x FY16 earnings is a significant discount to listed peers APO and OML and appears to be an attractive entry point, notwithstanding the company’s early stage of development and its lack of listed track record.