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Beacon Lighting Group Ltd soars 60% on debut: Is it too late to jump on board?

Beacon Lighting Group Ltd (ASX: BLX) has burst onto the ASX soaring almost 61% to $1.06 by mid-afternoon on its first day of trading.

The specialist retailer of lighting, ceiling fans and light globes has seen close to 25 million of the 96.75 million shares issued under the float switch hands, suggesting around one quarter of lucky initial public offer (IPO) holders are cashing out at a very tidy premium to the 66 cent float price.

Compared with the recent listing of retailer Dick Smith Holdings Ltd (ASX: DSH) it’s an outstanding success. Although it doesn’t knock Freelancer Ltd (ASX: FLN) off its perch as the best float to have come to market in recent times, Beacon now offers another example of the enormous stag profits that initial shareholders can sometimes enjoy.

Foolish takeaway

For investors who missed out on an allocation in the Beacon float but are now wondering whether they should be buying on market, it’s important to not get swept up in the hype.

At $1.06, Beacon has a market capitalisation of $228 million. For that, today’s buyers are getting net equity of $34.5 million (which is down from $41.8 million pre-float) and a forecast $11.5 million profit. Shareholders who took up the Beacon IPO look smart in retrospect today but the cleverness of on-market buyers today at current prices appears questionable.

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Motley Fool contributor Tim McArthur does not own shares in any of the companies mentioned in this article.

 

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