Ingham to Go Public in $1.5 Billion IPO
Ingham Group is the largest integrated chicken producer in Australia and second largest in New Zealand with an estimated market share of 40 and 34 per cent respectively.
Australia's largest poultry producer Ingham Group Ltd is planning to list on the ASX in a $1.5 billion IPO, one of the largest floats on the ASX year-to-date.
Chicken consumption has grown faster than the consumption of any other animal protein since the 1990s making it a vital part of Australian and New Zealand diets. Over the last few decades, chicken has cemented its position as the most consumed meat in Australia with per capita consumption having increased 80 per cent since 1995.
Ingham Group is the largest integrated chicken producer in Australia and second largest in New Zealand with an estimated market share of 40 and 34 per cent respectively. Ingham Group seeks to list on the ASX in November in a deal that values the company at between $1.3 and $1.5 billion. With a track record of nearly 100 years and a forecasted net profit of $99 million for the financial year 2017, should investors contemplate investing in the IPO?
Ingham Group is a vertically integrated producer of poultry. It owns and operates numerous quarantine facilities, breeding farms, hatcheries and processing plants across Australia and New Zealand. During the past few years Ingham has experienced steady revenue growth on the back of a dominant market position in Australia and New Zealand. With exports currently representing less than 1 per cent of revenue, Ingham could leverage off its brand and break into the Asian market. Management forecasts a dividend for the financial year 2017 with an estimated yield of 4.4%-5%.
While the income component is attractive, domestic growth opportunities appear somewhat limited due to its dominant position and mature market. In addition, there are regulatory risks as poultry imports are currently restricted by quarantine regimes and competition may increase if these laws are altered.
Trepidation associated with the private equity nature of this transaction could be offset by the large number of investment banks appointed to market the float. Overall the valuation appears reasonable and with management targeting the distribution of a fully franked dividend as early as FY17, the float appears suitable for investors seeking income.
ASX Code: ING
Shares on Offer: 214.7m – 270.8m
Listing Price: $3.57 - $4.14
Market Capitalisation: $1.33bn - $1.53bn
Listing Date: November 7
Author: Simon Herrmann
Oct 24, 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.