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Latitude IPO: 4 things to watch for as $3.1bn listing looms

Expected to be Australia's biggest IPO of the year, we look at four key things every investor should know before Latitude Financial lists on the ASX.

Latitude IPO in focus Source: Bloomberg

When will Latitude list?

Latitude Financial, the technology-emphasising, consumer finance company is expected to list on the ASX under the ticker symbol (LFS) this Friday, October 18.

Australia’s biggest IPO: details of the deal

It’s been tough going for Latitude.

The company tried but pulled out of listing on the ASX just last year. The timing wasn’t right, apparently.

And in the last few days Latitude has lowered is IPO price significantly – to A$1.78 per share – down from a high-low range of A$2.00 to A$2.25 per share.

According to Reuters, this new lower price means that Latitude will raise around A$1 billion and give the company an implied market capitalisation of A$3.1 billion. Such a figure, though high, is somewhat below the previous potential high-range market capitalisation of around A$4 billion.

Presumably though not assuredly, this lower price will help the stock trade more favourably in the aftermarket.

As the AFR pointed out, at these new price levels Latitude Financial (LFS) would trade at 11 times earnings and boast a 5.8% dividend yield.

Other details in view

Yet maybe most importantly and most stressed, has been Latitude’s forays, expansions and emphasis on its tech-focused approach.

Such finger-prints were all over Latitude’s well-painted prospectus.

For example, the company touted its recent acquisition of Genoapay, which the company notes will help with its ‘expansion in payments including the launch of LatitudePay in Australia.’

To sum up this approach in a paragraph would be to take the following from the IPO prospectus; that is:

‘Latitude has the operating scale to compete and grow against large incumbents, and the specialist digital focus to innovate customer and merchant and commercial partner experiences to compete with new financial technology companies.’

Latitude’s IT project capital expenditure has apparently also ramped up significantly in recent times.

Innovating sure is a costly business.

Latitude IPO: financials in focus

Looking at some of Latitude’s key financials, we see a company with a moderate growth outlook ahead of the expected IPO.

The FY19 forecast, for example, expects Latitude’s total operating income to come in at A$1,061 million. This compares favourably to the FY17 figure of A$983 million.

Further out, Latitude is forecasting operating income of A$558.3 million in the first half of FY20.

Yet maybe most impressive has been the company’s Cash NPAT growth in recent years. Rising from just A$214 million in FY17 to a forecasted total of A$278 million in FY19, the company has evidently seen a nice uptick on this metric.

Ahead and for H1 FY20, Latitude is expecting to bring in cash profits (NPAT) of A$141.3 million.

Finally and to finish out the 2019 fiscal year, the company has forecast A$7,861.9 million in gross loan receivables.

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