Apiam Animal Health Limited targets a listing on the Australian Securities Exchange (ASX) on 17th December in a $100m deal. Apiam seeks to raise $40m in an Initial Public Offer by issuing 40 million shares at $1 per share, which will result in a pro-forma market capitalisation of $98.5 million.
The heart and soul of the company is Managing Director Chris Richards who founded the company in 1998 as a single veterinary practice focused on the pig industry. In the past 17 years Apiam has evolved into a vertically integrated animal health business providing a range of products and services to the rural industry as well as farming markets. The Company estimates that it will provide veterinary services to approximately 35% of the pig industry, 50% of the beef cattle feedlot industry and 25% of the dairy cattle industry in Australia.
Apiam launches the Initial Public Offering to pay for its most recent acquisitions and to have access to capital markets for its long-term growth plan. Earlier this year the company entered into an agreement to acquire 12 veterinary businesses for a total consideration of $54.6 million, comprising of $25.6 million in cash and $29 million in equity. The average price paid for each practice is approximately six times FY16 EBITDA as the board forecasts $4.8 million of FY16 revenue for each veterinary business.
The company’s FY16 projections are based on the assumption that the veterinary businesses can be successfully integrated in its own health business model. The offer price values the company at a pro-forma price to earnings multiple of 13.7 for the financial year 2016.
Apiam has achieved revenue and earnings growth over the past three financial years and is self-funding. However the most recent acquisitions as well as any future deals remain subject to integration risks and there is no guarantee that revenue growth can be achieved or that capital will be available.
Overall the offer looks favourable as Apiam is self-funding and is experiencing revenue growth through a mix of organic expansion and acquisitions. Integration of pending acquisitions and future funding are primary risks. Even though the Company does not expect to pay a dividend for FY16, the offer presents an attractive opportunity to gain exposure to the animal health and farming sector.
Company: Apiam Animal Health Limited
ASX Code: AHX
Shares on Offer: 40 million
Listing Price: $1
Market Capitalisation: $98.5 million
Listing Date: December 17th
Author: Simon Herrmann
Nov 30, 2015
Simon is a financial analyst at independent research firm Wise-owl specialised in small-mid cap growth opportunities and ethical investment opportunities. Simon's aim is to disrupt the cliché approach to investment decision making as he believes that socially and environmentally responsible behaviour is a necessity to long-term wealth creation. Simon has a deep fundamental understanding of the global financial landscape and has compiled 300+ research reports, valuations and corporate appraisals. Simon is commonly featured in major media outlets and his research is published weekly in The Australian.