Luxury Car Dealer Autosports Group to Raise $160m in IPO
Following completion of the offer, Autosports will own and operate 25 motor vehicle dealerships and two repair facilities across Eastern Australia.
Autosports Group is an Australian retail company focused on luxury motor vehicle dealerships. Autosports seeks to raise $160 million in an initial public offering and targets listing on the ASX on 16 November 2016. The purpose of the IPO is to partially fund the acquisition of new dealerships, whilst at the same time helping existing investors to realise a part of their investment in the company. Following completion of the offer, the Company will own and operate 25 motor vehicle dealerships and two repair facilities across Eastern Australia. Autosports was founded in 2006 and has operations in Sydney, Melbourne and Brisbane.
Autosports is projected to increase revenue for a third consecutive year, having achieved a compound annual growth rate of 30 per cent pa. The Company is focused on both organic growth and acquisitions and successful integration of new dealerships is a major value driver. Autosports has been profitable for the past seven years and is expected to pay a dividend yielding approximately 3.8 per cent. In addition, management have a strong track record in the industry and are major shareholder in the Company.
However, there are a number of company and industry related hurdles which investors should consider. Consumer demand for luxury vehicles is highly discretionary and cyclical. As interest on working capital facilities represents a significant portion of Autosports’ total expenditure, the Company is vulnerable to interest rate movements and there are balance sheet risks in the event of an economic deterioration. Autosports’ growth strategy is focused on acquisitions, which are subject to integration risks and there is no guarantee that a return on shareholder funds can be achieved.
Overall, Autosports offers profitable exposure to demand for luxury vehicles in Eastern Australia. We are attracted to the Company’s growth trajectory, history of profitability and management track record. Integration of new acquisitions and working capital facilities are primary hurdles. The float should be supported by successful precedents in the industry and as management targets the distribution of semi-annual dividends as early as 2017, the IPO offers a balanced mix of capital growth and income.
ASX Code: ASG
Shares on Offer: 66.7m
Listing Price: $2.40
Market Capitalisation: $482
Listing Date: November 16
Author: Simon Herrmann
Nov 08, 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.