Analyst research on Tegel Foods was dispatched to fund managers yesterday as New Zealand’s biggest chicken producer gears up for a sharemarket listing.
Tegel could be listed on the NZX as early as next month. Photo / Kenny Rodger
The reports have been prepared by Goldman Sachs and Deutsche Bank/Deustche Craigs, the joint lead managers of the float, as well as First NZ Capital, the New Zealand lead manager.
The research reveals earnings before interest, tax, depreciation and amortisation (ebitda) of $84 million is expected from Tegel in the 2017 financial year.
Assuming a net debt of $120 million, the three brokers have given Tegel an equity valuation range of $628 million to $790 million.
The implied earnings multiples are as follows:
*Goldman Sachs – 8.9 to 10.8 times 2017 ebitda.
*Deutsche Bank Craigs – 8.9 to 9.8 times 2017 ebitda.
*First NZ Capital – 9.3 to 9.6 times 2017 ebitda.
On a price-to-earnings (PE) multiple basis, the three reports have a range of 14.7 times to 18.5 times.
The Business Herald understands that with no “pure comparable” to Tegel the analysts came to their valuations through looking at Australasian food firms, global branded protein suppliers and market multiples for comparable valuations, as well as discounted cash flow, to capture the long-term export growth potential of the Auckland-based business.
Tegel is currently owned by Asian private equity firm Affinity Equity Partners, which purchased the business for $605 million from Australia’s Pacific Equity Partners in 2011.
The company, which has operations across the country and more than 2000 staff, has been tipped to raise up to $500 million through an initial public offering.
Its shares could be listed on the NZX and Australia’s ASX as early as next month.
There has been market speculation that Affinity will retain a 30 to 35 per cent stake in Tegel following the deal.
Tegel’s holding company, Ross Group Holdings, reported earnings before interest and tax of $45.8 million from revenue of almost $563 million in the year to April 2015, according to financial statements lodged with the Companies Office.
The company hosted Australasian fund managers at site visits of its facilities in Auckland and Christchurch last week.