Apollo Tourism & Leisure Ltd is an Australian company focused on the manufacture, sale and rental of recreational vehicles ('RV'). The Company sells and rents caravans, motorhomes and campervans to domestic and international tourists. Apollo has manufacturing operations in Brisbane and Auckland and 17 rental office in Australia, New Zealand and the USA. Apollo was established in 1985 and now seeks to list on the ASX on 4th November in an IPO that values the company at $145 million. Apollo aims to raise $50 million of which the majority will be paid to the "Founding Shareholders".
Apollo has achieved growth since inception and achieved average revenue growth of 19.4 per cent over the past two financial years. The float will be interesting for investors looking for income as the company forecasts to pay a dividend for FY17 yielding 3.75 per cent. In addition management has a strong track record of executing growth plans and expanding the business. Further expansion into the US market or strategically appropriate acquisition are value drivers.
However, with interest-bearing liabilities of 3x FY17 EBITDA, there is a significant balance sheet risk and the company may be limited to fund future growth initiatives. As the founding shareholders have an interest of 65% after completion of the offer, the ability for minority shareholders to influence the direction of the company is impaired.
Apollo offers profitable exposure to demand for fleet services. We are attracted to the company's revenue growth trajectory, management and ability to distribute dividends. Balance sheet risks and Apollo's capital structure are primary hurdles. Management aims to grow the domestic business whilst expanding internationally, however cost control and maintaining sufficient capital adequacy will be crucial to deliver long-term shareholder value. The float appears well structured and the company offers an attractive mix of capital growth and income, but balance sheet gearing dampens the outlook.
ASX Code: ATL
Shares on Offer: 50m
Listing Price: $1.00
Market Capitalisation: $145m
Listing Date: November 4
Author: Simon Herrmann
Oct 17, 2016
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.