Discount furniture chain Fantastic Furniture is being valued at between $435 million and $669m on an enterprise value by Macquarie analysts ahead of its initial public offering.
The price equates to between 6.5 times and 10 times its earnings before interest and tax.
Fantastic Furniture, which is owned by Steinhoff International subsidiary Greenlit Brands, has plans to list through Macquarie Capital and Credit Suisse as early as this year.
It is forecast to generate $650.7m of sales for the 2021 financial year, up from $550.7m in the 2020 financial year to June.
Earnings before interest, tax, depreciation and amortisation is expected to be $76.7m, up from $61.7m in the 2020 financial year to June.
Net profit for fiscal 2021 is expected to be $47.6m, up from $38.5m for the 2020 financial year.
The retailer has 81 stores nationally and generated 29 per cent of its sales during the 2020 financial year from online, when shoppers stayed home since March due to the Covid-19 pandemic.
Founded in 1989, selling outdoor furniture at Parklea Markets in Sydney before opening its first store in 1991, Fantastic Furniture sources furniture from third party suppliers.
It was listed in 1999 before being purchased by Greenlit and delisted in 2016.
At the time, the company included the Plush and Original Mattress Factory brands.
Its market share in the value furniture segment has increased to 37 per cent from 34 per cent in the last four years.
Across the board, the Australian furniture market is expected to grow at 2.6 per cent per annum from the 2021 financial year to 2025, say Macquarie analysts, with the value segment expected to grow at close to 4.6 per cent over the same period.
Macquarie analysts say that the value segment of the Australian Home Furnishings market has grown at 4.7 per annum from the 2017 financial year to the 2020 financial year, which is ahead of the total Australian home furnishings market, which grew at 2.5 per annum over the same period.
The company has a target to have 100 stores over the medium term and has aspirations to expand into the New Zealand market.
Fantastic Furniture’s major competitor is Ikea, which has 10 large format showrooms and wider product categories.
Its focus is on smaller store formats throughout metropolitan and regional Australia, bulky goods with smaller contribution from accessories and homewares.
The company had a “refreshed” management team in 2018.
It has a 3.9 per cent market share of the Australian Home Furnishings market and about 11 per cent of the value market in the 2019 financial year.
Ikea has about 23 per cent of the value market and outside the two major players, the market is fragmented.
The company has grown revenues by 17.3 per cent on average and its EBITDA margins from 6.5 per cent in the 2018 financial year to 11.2 per cent in the 12 months to June.
Analysts say that the forecast period assumes a stabilisation in EBITDA margins at 11.8 per cent, driven by continuing revenue tailwinds in the second half of the 2021 financial year as written orders are delivered, partially offset by increased marketing spending from 3.8 per cent to 4.87 per cent of sales.
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