Peter Warren revs up $500m-plus float hopes

Peter Warren Automotive is believed to be working towards a cornerstone process for its initial public offering that could result in the vehicle dealership listing with a market value between $500m and $550m.

It is understood that the group’s owners, which includes private equity firm Quadrant and the Warren family, are hoping to pin down an IPO valuation within the coming days as they seek to lock in commitment from key institutional investors.

The company is looking to float at a valuation range of between 15 and 17 times forecast net profit — a discount to listed rival AP Eagers, which trades at about 22 times.

Peter Warren operates 70 vehicle dealer franchises across Queensland and NSW.

Quadrant invested in Peter Warren Automotive in 2016 and, under its control, it combined the company with James Frizelle’s Automotive Group, which was established in 1985 and is one of the largest motor vehicle dealers in Queensland.

The challenge for Peter Warren’s owners and its advisers, which include Morgan Stanley, Jefferies and Jarden, will be to ease concerns from fund managers about a digital disruption of car sales, with an increasing number of vehicles sold through the internet, and any fears about falling revenue with the likely prevalence of electric cars in the future.

Analysts on Tuesday suggested the business including debt was worth between $449m and $1bn, although brokers used different metrics to reach their valuation ranges.

Earlier, value expectations were higher, but much was dependent on whether the Warren family opted to include its real estate sites within the listed business.

The listed company will own two of its properties, including its flagship 9ha site at Warwick Farm in Sydney’s west.

The John Ingham-chaired business that counts Paul Warren as its executive chairman is expected to benefit from a recent increase in car sales as consumers spent up amid the global pandemic that has prevented international travel.

Morgan Stanley analysts believe the company will generate $1.6bn of revenue in 2021 and $32.2m of net profit, up 21 per cent from the previous corresponding period.

Jarden, meanwhile, forecasts $76m of earnings before interest, tax, depreciation and amortisation for this financial year and $77m for the calendar year.

Including debt, Morgan Stanley estimates Peter Warren is worth between $449m and $601m, Jefferies $609m to $696m and analysts at Jarden believe the business, including lease liabilities, is worth between $826m to $1.007bn.

Jarden says its range equates to between 10.9 and 13.3 times forecast EBITDA, and AP Eagers trades at 14.7 times EBITDA and fellow listed rival Autosports at 10.7 times forecast EBITDA.

Peter Warren has EBITDA margins of about 5 per cent.