MotorCycle Holdings in the Fast Lane with $46.3m IPO
MotorCycle Holdings has relationships with some of the most known brands in the industry such as BMW, Harley-Davidson or Yamaha.
The motorcycle dealership industry in Australia is characterised by privately owned individual dealership operators, often operated by motorcycle enthusiasts. This highly fragmented landscape has created a competitive environment but also the opportunity for consolidation. Only few dealers operate in various locations, with one of the exceptions being MotorCycle Holdings Limited.
MotorCycle Holdings Limited was founded in 1989 and currently operates 34 franchises in 24 locations across Australia. The company is focused on motorcycle dealerships and engaged in the sale of new motorcycles and accessories as well finance, insurance and warranty solutions. MotorCycle Holdings has relationships with some of the most known brands in the industry such as BMW, Harley-Davidson or Yamaha.
MotorCycle seeks to raise $46.3million through the issuance of $23.1million shares at $2 each. The Initial Public Offering is a private equity sale with the Archer Growth Fund selling down $26million worth of stock to realise part of its investment. The remaining proceeds will be used to strengthen the balance sheet by paying back debt.
MotorCycle Holdings is cashflow positive and revenue has increased at a compound annual rate of 8% since FY13. Three years ago sales totalled $158.7million and for FY16 management targets $212.8million in sales and $7million in net profit. The company has a strong market position in a highly fragmented industry and management targets to grow organically and via acquisitions. Subject to performance, investors should expect fully-franked dividend distributions from 2017 onwards.
The existing income portfolio of its franchises, Motorcycle’s revenue growth trajectory and strong market position are attractive qualities. Principal hurdles include integration and supply chain risks. Organic growth as well as expansion of its franchise network is the near-term catalyst and with management targeting the distribution of dividends, the float offers an attractive mix of income and capital growth.
Company: MotorCycle Holdings Limited
ASX Code: MTO
Shares on Offer: 23.1m
Listing Price: $2.00
Market Capitalisation: $75.9m
Listing Date: Apr 29
This publication appeared first on The Australian
Author: Simon Herrmann
Apr 19, 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.