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Big River Industries IPO, page-14

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medici

206 Posts.

03/04/17

22:18

Post #: 23827950
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Originally posted by stardestr0yer ↑

Here is my review.. I have submitted my bid!

Stock: Big River (BRI)
Lead Brokers: Taylor Collison
Offer Dates: Opens 3^rd April, Closes 18^th April
Shares on offer: 11.6mil @ $1.46 (17m)
Total Shares: 52.6mil
Escrow: 36mil
Market Cap: $76.8
Enterprise Value: $83.2
P/E: 11
Options: ~1.4mil exercisable at $2.00 - $2.20
Seed/Pre-IPO: None
Dividend: 5.4% for FY2018

Business Overview:
Big River Group Pty Ltd has established itself as a diverse manufacturer and distributor of timber and building products. Big River is an integrated Australian timber products business that operates across the full continuum from procurement of log raw materials through to sale of finished products to end users. Diversified customer base of over 2,700 individual customer accounts

Finances:
Growth has definitely slowed down over the past few years and this has been forcasted for 2017 and 2018… however it plenty of mention is made in regards to acquisitions and as such 2018 figures would take into account only the status quo. Lots of talk in the interview and the prospectus about acquisitions and expanded product range.

Management:
Board of directors is more than suitable but I am more impressed by the CEO and his direct reports. All of them (other than Craig) have real tenure with the business and I have no doubt will want to see the company continue to grow and be successful.

Other matters of interest:
States in the prospectus “I would like to highlight the fact that none of the Existing Shareholders are selling any shares in the Offer. In fact, the Existing Shareholders have entered into voluntary escrow arrangements, reflecting their support of the Offer and Big River’s prospects.”
Another quote “Big River has approached over 20 parties in the past twelve months to investigate potential appetite for sale. Almost all of these approaches have been to privately owned businesses. A common theme appears to be the absence of a defined succession plan with ageing founders.”

How will capital be used: 75% of capital raised will be used to pay of debt and 15% will pay for the cost of the offer. As they are a profitable business, the cash from IPO is not required to operate the business as an ongoing concern.

Thoughts on the business:
There are plenty of competitors (and big ones) out there and margins are tight, so I believe that this business is holding itself together due to strong leadership and costs being well maintained. There is no reliance on a few customers bringing in a majority of the revenue and this is a $10 billion market so there is lots of room to grow. I will definitely be taking a stake in this one for my SMSF for the following reasons:

Commitment from all existing shareholders not selling down

The management team running the business

Potential for growth from acquisitions

Forecasted dividend

If anyone looking for a decent stag (>10%) within the first few days then this may not be for them.

Expand

Love the pricing and the management's decision about their shareholdings in IPO. But don't have much cash on hand.

One thing to note, in that youtube interview, CEO says funds will be used for expansion however in the prospectus as you mention it is mainly for paying down the debt and IPO cost.
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