PWR HLDING FPO shares race higher after explosive IPO

Credit: Julien REBOULET

The share price of PWR HLDING FPO (ASX: PWH) or PWR has motored some 80% higher from its initial public offer price since hitting the ASX boards just last week.

The Queensland-based company is involved in the design and production of customised cooling solutions for motorcars in the glamorous worlds of Formula One, NASCAR, Indycar and V8 Supercars racing among other motorsports fields.

The stock was issued at $1.50 per share at the IPO stage to raise around $81 million in gross proceeds, which will be used to help PWR deliver on its plans to expand sales of its cooling systems into wider motorsports markets and high-performance motorcars more generally.

The market capitalisation of the business at the offer price was $150 million, but with the stock now at $2.69 that market cap is $269 million. Investors presumably bidding the stock up on the basis of the strong pro forma growth forecasts with financial year (FY) 2016 net profit expected to be up roughly 24% to $10.5 million, versus FY15’s total around $8.46 million.

Revenues are also forecast to grow 44% over the prior year’s $47 million, with strong organic growth due to growing demand across motorcar manufacturers for its engine cooling products.

Selling for $2.69 the group trades on around 26x forecasts for 10.5 cents per share in earnings for FY16. The dividend is expected to total 4.2 cents per share which would place it on a 1.6% yield at current prices.

Evidently the strong growth forecasts have got investors revved up over the potential to diversify into more general motoring markets thanks to its seemingly market-leading products. At current prices and without much of a track record as a public company shares look expensive and the stock may be one to watch as a spectator for now.

Others involved in the original equipment manufacture (OEM) motoring markets include software business Infomedia Limited (ASX: IFM), while businesses like Automotive Group Holdings Ltd (ASX: AHG) are more generally involved in motor vehicle trading.

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Motley Fool contributor Tom Richardson has no position in any stocks mentioned. Unless otherwise noted, the author does not have a position in any stocks mentioned by the author in the comments below. The Motley Fool Australia owns shares of Infomedia.

You can find Tom on Twitter @tommyr345

We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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