Here. I’m trying to shed
some random light on the most recent IPO of Beira Group (BPPL).
By and large, it is a good
IPO that came to the market in a while. Key points being:
- The company is an established long standing one with long track record, delivering profits and a seemingly good balance sheet (does not look that they have capitalized any revalued land. Well they have actually done a revaluation after 5 years which is understandable);
- As I usually say this is a productive company and not a shell company that owns some crappy businesses (best example: Adam Investments);
- I think the governance aspect is comparably better.
Skepticism
However, I’m too skeptic due
to several reasons.
- Firstly, the company is not raising money rather it is a money out deal. I’d prefer a money in deal where the Company would be utilizing the IPO money for expansion and thereby better valuations in the long term;
- Why is Hirdaramani’s exiting this business. Again the question is if the business outlook and prospects for the company are better someone would stay on, in a perfect world (may be Hirdaramani’s need some money for other purpose or they are having issues with other shareholders of the company);
- I wonder if this is the right time to go to market when the market is trading at historic low multiples for the last two years. The idea here is that no company, with a proper evaluation, would consider going to market at this time unless they are desperate (due to some reason that is not going to be good for the public investors).
The bright side
I’m not completely negative.
In the offering, they only issue 10% to the public. That is the bare minimum to
be listed on the Diri Savi Board. The two lessons from this is that company’s
current owners (except Hirdaramani’s) are greedy and don’t want to share most
of it with the public. Second lesson being they are confident that the raising
can be completed because if they were short a decimal point it will be a flop.
Now the pricing
Again and as I usually say,
not every good company is a good investment. That said better to look at
pricing (I actually don’t have time to do a valuation of this company). The
comps I prefer to use are slightly different to what the IB guys have used.
(But I don’t ignore them and reproduce them in the table below).
Looking at this I’m indifferent on an investment in to B P P L.
