Online cosmetics retailer Adore Beauty is shaping up to be a popular initial public offering among investors, as analysts at Morgan Stanley estimate that the company’s value will be somewhere between $651m and $870m on an enterprise value basis.
The retailer, which is owned by founder Kate Morris and Quadrant Private Equity, is set to list in October through advisers Morgan Stanley and UBS.
Meetings this week are under way to lock in cornerstone investors.
It is expected that the cornerstone process will be finalised ahead of the company’s IPO bookbuild on Thursday.
Expectations are that the group will raise about $200m, potentially as much as $250m, with the company’s market value to be up to $600m.
Some believe it may prove to be overpriced in the long run, but the current hype around online businesses due to the increase in online shopping because of the coronavirus pandemic means its owners are still likely to have made a lucrative investment.
Comparable online retailers such as Kogan are trading at about 3.5 times their revenue and Temple and Webster 4.5 times.
The $651m-$870m valuation range for the business equates to between 4.1 and 5.5 times its revenue for the 2020 calendar year, which is set to be $158m.
Revenue is said to be growing at about 76 per cent a year, which is largely the attraction of the company.
Analysts say that Adore Beauty is on track to generate $6.4m in earnings before interest, tax, depreciation and amortisation for 2020.
It generates 78 per cent of its revenue from women and most customers (37 per cent) are aged between 25 and 30.
UBS analysts have also released research on the business, but the research does not include a valuation range estimate.
The analysts say the company is Australia’s largest pure-play online retailer of beauty and personal care products.
It generated $121m of revenue for the 2020 financial year.
They describe the key strengths of Adore Beauty as its wide product range, with a focus on the growing skincare category, strong online capabilities and its customer engagement strategy.
Its customer retention rate is 61 per cent.
“We believe the key challenge (but also opportunity) for Adore Beauty will be lifting brand awareness … through continued marketing initiatives,” UBS analysts said in their research.
They believe that the company has the scope to lift its EBITDA margins from 4.1 per cent over the medium term through increasing scale by way of buying power and brand awareness, a private label launch and controlling employee costs.
Healthscope firmly in the sights of Bain
Bain Capital is closing in on its next big target struggling with too much debt – the country’s second-largest hospital operator Healthscope.
Incitec Pivot’s fertiliser price likely too high for some
Potential bidders have been given information about Incitec Pivot’s fertiliser unit, but the jury’s still out as to how much they will be prepared to pay..