IPO hopefuls cautious after Latitude flop saps confidence

Boost Juice owner Retail Zoo has been meeting investors. Picture: Phillip Rogers

Initial public offering hopefuls Onsite Rentals and Retail Zoo are believed to be working hard to lock in cornerstone investors before moving forward with their listings, as advisers remain on edge after the collapse of the $3.2bn Latitude float last week.

It is understood that investment banks working with both Boost Juice owner Retail Zoo and Onsite Rentals have been involved in meetings with a small group of investors to gauge their support, and should they be locked in for a sizeable amount of stock, they will then approach the broader market with pricing and move forward with their listing plans.

Latitude Financial last week failed to gain strong support for its $1bn IPO and shelved plans for what would have been the largest listing of the year.

The blame is said to lie with a lack of support from international investors, who were spooked at the Australian regulatory environment for lenders, and a yield that was too low for retail investors.

The situation has created nervousness among other companies planning to list.

Broadly, electronic payments company Tyro Payments, advised by JPMorgan and Morgan Stanley, is still expected to successfully float at a value of at least $1bn, with many taking a positive view of the company that is only seeking about $240m.

The Robbie Cooke-run company that counts Atlassian founder Mike Cannon-Brookes as a shareholder is likely to generate a 20 per cent lift in annual gross profit to $100m this financial year, as revenues grow to $240m.

PropertyGuru’s bookbuild starts on Tuesday and while many have said the company is grossly overpriced, there has been a growing opinion in recent days that the Singapore online real estate listings business that is yet to turn a profit will gather support from investors.

This is because private equity owners Kohlberg Kravis Roberts and TPG Capital are retaining their stakes in the company.

PropertyGuru, which is advised by Credit Suisse, UBS, Ord Minnett and Morgans, will sell shares at between $3.70 and $4.50 as it looks to raise between $345m and $380m, taking its market value to between $1.2bn and $1.4bn, with the company to be priced on Thursday ahead of a listing on Friday.

Prospective investors may need more convincing on Onsite Rentals, Retail Zoo and Funlab, although sources close to Funlab say they are encouraged by early investor feedback.

In recent days, fund managers were believed to have been told that Onsite Rentals would likely list with a valuation of between four and five times earnings before interest, tax, depreciation and amortisation of about $100m and that they could expect a selldown of about three quarters of the business, taking the market value to between $400m and $500m and an IPO of more than $337m. But those close to the deal disagree on price ahead of its market debut on November 18.

Working on the IPO are Macquarie Capital and Bank of America Merrill Lynch and Macquarie analysts had earlier valued the business at between 4.5 and seven times. The business offers a fleet of 70,000 rental equipment assets to businesses mainly in the resources sector. It has been owned by Next Capital and is now controlled by US debt investors, who recapitalised what was then a distressed business.

Attempts have been made for a listing in the past.

Fund managers are also showing caution about the IPO plans of Betty’s Burgers and Boost Juice owner Retail Zoo, backed by Bain Capital and founder Janine Allis.

Retail Zoo is being listed by Citi, UBS and Goldman Sachs and generates $33m in annual EBITDA.