Last week Tyro Payments Ltd (ASX: TYR) successfully completed its IPO and listed on the ASX boards. On day one its shares finished the day a massive 23% higher than its listing price at $3.38.
Another company has followed its lead and is on fire after listing on the ASX today. This afternoon the Nuchev Limited (ASX: NUC) share price rocketed 31% higher than its listing price of $2.60 to a high of $3.40.
At the time of writing the Nuchev share price is up 25% to $3.26.
What is Nuchev?
Nuchev is an infant formula company that was founded by Ben Dingle in 2013. Mr Dingle is the co-founder of Synlait Milk Ltd (ASX: SM1), which is best known as the processing partner of A2 Milk Company Ltd (ASX: A2M).
As with Bubs Australia Ltd (ASX: BUB), Nuchev has a focus on goat milk products.
Its primary products are its Oli6 branded goat milk infant formula range, which are sold across multiple sales channels in Australia, China, and Hong Kong.
Oli6 is formulated specifically for the needs of infants and children. The company's prospectus states that the potential health benefits of the range are supported by scientific laboratory research published by RMIT University researchers.
What is its market opportunity?
According to its prospectus, the global goat milk infant formula market is expected to grow at a compound annual growth rate of 16.6% from $6.3 billion in 2018 to $13.6 billion in 2023.
Nuchev is specifically targeting the Chinese goat milk infant formula market, which is forecast to grow at a compound annual growth rate of 18.8% from 2018 to 2023. This will reach $9.2 billion in size in 2023 and represents 12.8% of the total Chinese infant formula market.
How is it performing financially?
In FY 2019 Nuchev reported revenue of $9.5 million, gross profit of $4 million, and loss after tax of $9.7 million.
It expects to almost double its revenue in FY 2020. Its prospectus guidance is for revenue of $18 million, gross profit of $6.8 million, and a loss after tax of $6.5 million.
Its IPO raised $25 million of primary capital through the issue of 9.6 million new shares at $2.60 per share. These funds will be used to support its growth objectives and repay existing debt.
Based on its current share price and its total shares outstanding of 45 million, Nuchev currently has a market capitalisation of just under $150 million. This means its shares are changing hands at 8.3x forecast FY 2020 sales.
I feel it's a little too soon to tell if Nuchev is the next a2 Milk Company at this stage, but it could be worth keeping a close eye on its progress.
