Motley Fool Australia

Upcoming IPOs this week

Initial Public Offering (IPO)

Each week I like to look at the upcoming IPOs which are happening on the ASX. It gives me a chance to see if there are any future stars being listed and perhaps get in early on that success story.

Every single share that currently trades on the ASX was a newly-listed share at one point, they should not be avoided just because they are new.

According to ASX Ltd (ASX: ASX) there is only one IPO this week. That share is:

Prospa Group Limited (ASX: PGL)

Its principal activity is online lending to small businesses.

Prospa has some quality underwriters as part of its float with Macquarie Group Ltd (ASX: MQG) and UBS.

Prospa claims to be Australia’s number one online lender to small businesses, with its key selling point being that it can deliver fast finance solutions.

The company offers business loans of between $5,000 to $250,000. No security is needed to access up to $100,000. According to Prospa, the application takes just 10 minutes, you can get same day approval and funding is possible in 24 hours. It looks at the health of the business to determine credit worthiness.

Prospa has funded over $500 million in loans since 2011 and has a 97% customer satisfaction rate.

It has a few strategic partners including Westpac Banking Corp (ASX: WBC), Mortgage Choice Limited (ASX: MOC), Reckon Limited (ASX: RKN) and Xero Limited (ASX: XRO).

Based on the number of loans from Prospa by industry, 21% of loans were for building and trade, 20% for hospitality, 17% for professional services and 16% for retail.

According to Prospa, its net revenue has increased from $23.4 million in FY16 to $53.6 million in FY17 and it’s forecasting that to grow to $97.1 million in FY18. For those same three periods, earnings before interest, tax, depreciation and amortisation (EBITDA) was minus $3.3 million in FY16, $3.8 million in FY17 and forecast to be $5 million in FY18.

Net profit after tax (NPAT) is expected to show a loss of $1.8 million this year due to the listing costs, but in FY19 it could show profitability.

It’s looking to raise $146.5 million and list on 6 June 2018.

Foolish takeaway

Prospa does sound interesting and I can understand why some investors would be interested in its shares. At the current stage of the economic cycle I don’t think I will be looking to buy any shares, but online lenders are likely to take greater market share over the coming years. It’s perhaps one to put on the watchlist.

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of ASX Limited and Xero. 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 Scott Phillips.

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