Pepper IPO: 10 Things you Must Know Before ASX Listing
We look at the top 10 things investors must know before the non-bank lender IPOs.
Pepper IPO: Top 10 Facts
We breakdown some of the key pieces of information from the Pepper Money prospectus and look at the top ten things investors should know before the initial public offering (IPO).
What does Pepper Money Do?
Pepper Money represents one of Australia’s largest non-bank lenders – with operations spanning home loans, commercial real estate loans, asset finance, as well as broker and loan servicing.
Pepper boasts a 0.5% market share of Australia’s $2 trillion mortgage market and a 5.1% share of Australia's motor vehicle and equipment finance market
What’s the Narrative?
The non-bank says is key goal is to help people succeed. To that end, the company focuses on working with customers who are ‘under serviced’ by others in the industry – such as the big four banks.
Since its founding, Pepper has written over $32.3 billion worth of loans and its assets under management (AUM) have continued to grow steadily, forecast to increase 11.5% to $16.8 billion in CY21
As with traditional banks, Pepper generates its income through earned interest and fees, as well as through third-party fees.
Fundamentals at a Glance
The grand ambition of helping people succeed aside, Pepper has notched up strong operational results in the last three years and is forecasting that robust performance to continue.
Here are the key results:
- Net interest income rose from $192.2 million in CY18 to $352.2 million in CY20 and is forecast to hit $356.3 million in CY21, on a pro forma basis.
- Earnings (EBITDA) were $63.3 million in CY18 and climbed to $180.6 million in CY20. EBITDA is expected to hit $197.9 in CY21, on a pro forma basis.
- Net profits (NPAT) from operations have risen in step, from $32.2 million in CY18 to $106.3 million in CY20. Net profits are forecast to hit $120.7 million in CY21.
Will there be Dividends?
While subject to business conditions, the non-bank said its intention was to make use of available profits and franking credits to pay dividends.
The broad strokes of this dividend policy is to payout between 30-40% of NPAT. The actual payout, period-by-period, may vary.
The company is forecasting an annualised pro format dividend yield – based on the offer price – of 3.3%.
Funds, funds, and More Funds
Pepper Money is looking to raise $500.1 million in capital.
The company said it would use the bulk of the funds ($474.7 million) to partially repay a Bridge Facility and an existing shareholder loan.
The remaining $25.4 million will be used to pay for the IPO offer costs.
The company said by publicly listing it would give greater opportunity for people to invest in the business as well as enhance the firm's own 'financial flexibility to execute on its growth strategy.'
Pepper Share Price
Under the IPO, Pepper Money is aiming to issue approximately 173 million new shares at $2.89 per share. Taking into account other shares on issue, following the completition of the offer the total number of shares on issues would be 493 million.
The IPO will be fully underwritten.
Upon listing, Pepper expects to have a market capitalisation of $1.27 billion and will trade on a forward (FY21) earnings multiple of 10.5x.
Pepper Money has applied to trade under the ticker PPM once it lists on the ASX.
The stock is expected to begin trading on the ASX on a conditional and deferred settlement basis on 25 May and on a normal settlement basis on 27 May.
Those dates, however, are subject to change.
This information has been prepared by IG, a trading name of IG Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
CFDs are a leveraged products. CFD trading may not be suitable for everyone and can result in losses that exceed your initial deposit, so please ensure that you fully understand the risks involved.
Live prices on most popular markets