The Vitaco IPO is set to float on 16 September 2015 at a price of $2.10. As Vitaco is on course to record its third consecutive period of revenue and profit growth, should investors participate in the Initial Public Offering (IPO)?
Is Australia poised to advance its ranking in the world of professional bodybuilding? After half a century of competition, the nation has yet to be represented atop of the winner’s podium at the annual Mr Olympia competition. The event has been won seven times by Austrian born - Arnold Schwarzenegger, whilst the USA and Britain have dominated since the mid 1980’s.
Could recent trends in consumption of ‘sports nutrition’ products herald a new era? Encompassing protein bars, powders, and drinks – Australia commands the world’s highest per capita consumption sports nutrition products, and hosts the world's second largest market overall. On a per capita basis, the nation’s consumption is 50 per cent greater than second ranked USA and three times higher than the UK. Now an $800million market, domestic demand has grown at double digit average rates during the past five years.
The nation’s ‘work out’ ethic is supporting the coming listing of Vitaco Holdings. Originally from New Zealand, Vitaco’s principal focus is the manufacture and marketing of health foods, vitamins, and dietary supplements. It operates three manufacturing plants in Auckland, New Zealand; and distributes to over 18,500 grocery, health food, pharmacies and gyms across Australia and New Zealand. Vitaco’s products are marketed under multiple brands including Healtheries, Nutralife, and Aussie Bodies. Its recent purchase of Musashi delivers a 20 per cent market share in the sports nutrition category.
With Vitaco’s listing representing a sell down by existing shareholders, incentive for new investors lies in the company’s ongoing growth potential. Vitaco is on course to record its third consecutive period of increased revenue and profit. The Company has significant capacity to sustain the trend with utilisation of existing manufacturing facilities ranging from 30% to 70% across major product lines. To maintain the trend, the Company is focused on product development and export markets, launching over 200 new products in FY15 and a direct to consumer campaign in China.
Principal risks surround its capacity to maintain brand loyalty, integrity and repeat custom. Vitaco has also recently relied on new product development and acquisitions to drive growth. Approximately 20 per cent of revenue is generated from products released in the preceding three years, however benefits of continuous supplements to the portfolio cannot be assured.
Company: Vitaco Holdings Ltd
ASX Code: VIT
Shares on Offer: 110.3million
Listing Price: $2.10
Market Capitalisation: $292million
Listing Date: September 16th
Author: Tim Morris
Sep 08, 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.