Two pub IPOs that may whet your appetite

Is owning a pub as much fun as visiting one?

If trying to decide what beer to try next is one of the simple pleasures of life, then you will be pleased to soon have more choice in investing in pubs. Owning a pub may be a dream for some, and two upcoming initial public offerings (IPO) could make that dream a reality.

Later this year, the Redcape Hotel Group, made up of 71 hotels along the eastern coast, is planning to list on the ASX for a total estimated market capitalisation of around $300 million. The company leases its bars to Wesfarmers(ASX: WES) liquor division.

It has the financial backing of two US equity firms, Varde Partners and York Capital Management, which originally teamed up with Goldman Sachs to recapitalise the company, although since then the investment bank has sold its share.

Another IPO on the horizon scheduled for early next year is the Australian Pub Fund, which is being backed by such famous business names as Geoff Dixon, former head of Qantas (ASX: QAN) and current head of Tourism Australia, and entrepreneur John Singleton.

The company currently holds 12 pubs, and has recently purchased The Exchange pub in Brisbane for a record $34 million in that area. In total, it is projecting to hold a total of about $400 million in assets, which will also include marina properties.

Until the two IPOs occur, investors can indulge in a little nip with the ALE Property Group (ASX: LEP). The group operates 87 pubs, currently has a market capitalisation of $521 million, and is 8.7% owned by Woolworths (ASX: WOW). The company can give you an idea of how the two IPOs may perform.

It has a stable revenue stream, yet sales have been roughly the same since 2007. You could chalk that up to downward discretionary spending during the GFC, but for investors that doesn’t give much return. Earnings have been up and down — two net losses in the past four years — so it is hard to gauge future profit expectations.

Foolish takeaway

There will always be a place in our hearts for our favourite pub or hotel, but as investors it is best to look over the financials with a stiff black coffee, and see what the future may hold for these pub business opportunities. You want growing companies with good profit margins and return on equity. Sometimes it is best not to mix business and pleasure, or you might end up crying in your beer.

Discover The Motley Fool’s favourite income idea for 2013-2014 in our brand-new, FREE research report, including a full investment analysis! Simply click here for your FREE copy of “The Motley Fool’s Top Dividend Stock for 2013-2014.”

More reading

Motley Fool contributor Darryl Daté-Shappard does not own shares in any company mentioned. 

Wondering where you should invest $1,000 right now?

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for over ten years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes could be the five best ASX stocks for investors to buy right now. These stocks are trading at near dirt-cheap prices and Scott thinks they could be great buys right now.

*Returns as of January 12th 2022

More on ⏸️ Investing

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

asx share price competitions represented by businessmen arm wrestling
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »

person reading news on mobile phone
⏸️ Investing

Why Fox (NASDAQ:FOX) might hurt News Corp (ASX:NWS) shareholders

News Corporation (ASX: NWS) might be facing some existential threats from its American cousins over the riots on 6 January

Read more »