Silk Logistics seeks $70m for IPO but investors are wary

Sources say that Silk’s owners, through its advisers Shaw and Partners and Morgans, have been looking at a valuation equating to between 14 and 16 times the group’s net profit. Picture: NCA NewsWire/Nikki Short

Silk Logistics is believed to be looking to raise about $70 million for its initial public offering, but some wonder whether the company will head to the boards after other recent floats have failed to fire.

Sources say that Silk’s owners, through its advisers Shaw and Partners and Morgans, have been looking at a valuation equating to between 14 and 16 times the group’s net profit.

They have been trying to shore up support through a cornerstone process.

However, some investors that had earlier been interested in taking stock in the business have opted to sidestep the cornerstone process after shying away from its asset-light model and the fact that a number of its customers are beneficiaries of Covid-19.

Earlier, analysts at Shaw and Partners said that they believed that the business was worth between $209 million and $251 million including debt.

Silk Logistics is owned by managing director Brendan Boyd and three other key managers along with Gandel Invest, the company of Tony Gandel, son of billionaire retailer John Gandel.

It operates in two divisions, Port Logistics and Contract Logistics.

Silk’s earnings before interest and tax are forecast to be $17.8 million for the 2021 financial year, growing from $13.6 million in the 2019 financial year. Analysts expect its EBIT to increase to $20.9 million for the 2022 financial year.

The valuation estimates from Shaw and Partners equate to a range of between 10 and 12 times the group’s forecast EBIT for the 2022 financial year. Locally listed peers trade on 18.9 to 19.9 per cent, the analysts said.