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

Income Sources

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.

Why?

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.

Ticker

Pepper Money has applied to trade under the ticker PPM once it lists on the ASX.

Important Dates

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.

How to Trade the Pepper IPO

You can trade Pepper Money once the stock lists on the ASX with IG. Before then, check out our demo account and practice your trading strategies or open a live account with us now.

IGA, may distribute information/research produced by its respective foreign affiliates within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.

The information/research herein is prepared by IG Asia Pte Ltd (IGA) and its foreign affiliated companies (collectively known as the IG Group) and is intended for general circulation only. It does not take into account the specific investment objectives, financial situation, or particular needs of any particular person. You should take into account your specific investment objectives, financial situation, and particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit.

Please see important Research Disclaimer.

Live prices on most popular markets

  • Forex
  • Shares
  • Indices
liveprices.javascriptrequired
liveprices.javascriptrequired

Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.

liveprices.javascriptrequired

Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 20 mins.

The Momentum Report

Get the week’s momentum report sent directly to your inbox every Monday for FREE. The Week Ahead gives you a full calendar of upcoming key events to monitor in the coming week, as well as commentary and insight from our expert analysts on the major indices to watch.

For more info on how we might use your data, see our privacy notice and access policy and privacy webpage.

You might be interested in…

Find out what charges your trades could incur with our transparent fee structure.

Discover why so many clients choose us, and what makes us a world-leading provider of CFDs.

Stay on top of upcoming market-moving events with our customisable economic calendar.