The BWX IPO is set to list on the ASX on 11th November to raise $39 million listing at $1.50 per share under the ticker code BWX.
Regulation in the market for personal care products has gathered momentum over recent years. The European Union introduced a ban on animal testing for cosmetics in 2004, and in 2013 upgraded the moratorium to include imported goods. Whilst the US and Australia introduced parliamentary motions intended to address the issue during 2014, India emerged as a world leader, banning animal testing for both cosmetic ingredients and final products, becoming the first Asian country to pass such a law.
Although Australia represents just 1 per cent of the global pie for personal care and beauty products, local trends indicate that consumer demands for more natural and ethical products may be driving the global regulatory sweep. Within domestic pharmacies, sales of skin care products in the ‘natural’ category are witnessing growth almost double the category average.
Consumer interest in natural personal care products is driving the coming listing of BWX, which is principally engaged in the manufacture and distribution of personal care products under the ‘Sukin’ brand. Within pharmacies, Sukin attracts a market share of 14 per cent in the skincare category. Established in 2007, the Sukin franchise was acquired by BWX in 2015 to complement its contract manufacturing operation in Victoria. The enlarged group is now vertically integrated with 130 employees.
Its initial public offer represents a partial sell down by existing shareholders and a balance sheet initiative. Borrowings assumed to acquire the Sukin franchise are scheduled to be paid down, providing financial flexibility to grow the enlarged business. Incentive for new investors lies in the amalgamated group’s pro forma financial performance, which includes three consecutive years of increasing sales and earnings growth.
To sustain the trend, management aims to shift manufacturing capacity away from third party contracts in favour of its proprietary Sukin brand. Risks surround infancy of the enlarged company’s operations, reliance on the Sukin brand, and structure of the float. As Sukin was only recently acquired, there remain integration risks. With the brand projected to account for 70 per cent of earnings, the impact any unexpected obstacles could therefore be magnified. On face value, the float provides ample capital gain and income generating potential, however its high degree of unallocated free float could impair early trading the stock.
Company: BWX Ltd
ASX Code: BWX
Shares on Offer: 26.2million
Listing Price: $1.50
Market Capitalisation: $135.9million
Listing Date: November 11th
Author: Tim Morris
Nov 03, 2015
Having studied Commerce and Science at the University of New South Wales, Tim began his career in an analytical capacity with Wise-owl. Tim has conducted over 500 corporate valuations and appraisals, specialising in pre revenue assets and emerging markets. For the last five years, his Equity Capital Market insights have been featured as part of a weekly column in The Australian and regularly features on Sky News, CNBC, ABC and Bloomberg TV.