Seems like every man and his dog (pun intended) is IPO-ing their business on the ASX these days.
Traditionally fool.com.au and its contributors warn readers to steer clear of Initial Public Offerings (IPOs) because of a fairly robust rule of thumb that says 50% of all launches trade below their offer price in their first year out.
However a write-up in Fairfax media on one potential IPO caught my eye today, and for the right reasons:
National Vet Care ("NVC")
Headed up by Tomas Steenackers, who was a general manager at Greencross Limited (ASX: GXL) for two years, National Vet Care has ambitious plans to begin a veterinary empire to rival larger competitor Greencross.
Backed by a single clinic in Albion, Brisbane, NVC has conditional agreements in place to acquire another 34 clinics – if it can convince investors to fund the purchase. That would give NVC a total of 35 clinics, and it plans to acquire a further 10 in the first year followed by 15 per year after that.
With approximately 2,600 clinics in the country, the initial acquisition would straight away make NVC the second largest player, behind Greencross with 125. Obviously this has risks since single-clinic NVC has no track record with acquisitions and investors are potentially handing over a lot of funds on promises.
The thing that really caught my eye was NVC's board, which includes Greencross's former Chief Financial Officer (CFO) Wesley Coote, and Stephen Coles who was Greencross's founding executive director. The chair of the board is Susan Forrester, who also sits on the board of G8 Education Ltd (ASX: GEM), a similar company with a very successful roll-up strategy.
Even better, Mr Steenackers indicated that NVC would steer clear of the retail sector – which has caused much consternation for Greencross shareholders recently – and focus solely on providing clinical services. This exposes the business to moderate long-term growth while simultaneously giving phenomenal blue-sky potential thanks to the company's roll-up strategy.
Greencross's market value has grown from $30 million in 2007 to just over $650 million today; it's been a standout performer. NVC could also deliver the goods to shareholders, but until the offer booklet comes out in early July with details like margin, price, debt funding and so on there are too many uncertainties to make a decision yet.
Either way National Vet Care is definitely worth watching, as are a number of other shares at the smaller end of the market…
