Australian investors will soon be able to own a portion of the nation's largest babies-only retailer with reports suggesting that Baby Bunting will float on the Australian Securities Exchange by the end of the year.
According to the Fairfax press, Baby Bunting, which sells everything a baby could need including prams, cots, clothing and toys, made its intentions to go public in November last year. The retailer is on track to achieve $175 million in annual sales (for the year ending 30 June) while earnings before interest, tax, depreciation and amortisation (EBITDA) are expected to hit $12.5 million.
Indeed, there is scope for plenty of growth by Baby Bunting. As it stands, according to the Fairfax press, the company operates 27 stores, suggesting an average of nearly $6.5 million in sales per store annually. By rolling out between four and eight new stores per year over the next five years; Baby Bunting hopes to have 73 stores open.
Does an initial public offer (IPO) make sense?
Not only would an IPO allow the company's founders to sell some of their stake in the business, it would also raise some of the capital necessary to act on its growth ambitions. Meanwhile, investor demand for IPOs is expected to remain hot in 2015, according to a recent report by Deloitte, which indicates the owners could get a good price for their business by listing sooner rather than later.
Management would also be encouraged by the strength of baby food producer Bellamy's Australia Ltd (ASX: BAL) which has surged in price since its float in August last year. Since opening at $1.31, the stock has surged 118% to be trading at $2.85 today. With strong growth prospects and a strong management team, Baby Bunting is certainly a stock to watch out for in the lead up to its float later in the year.
