It’s been one-way traffic off the ASX since the start of last year, with takeovers outpacing initial public offerings by a factor of more than 50-to-one.
Redox, an unheralded chemicals importer from south-west Sydney, is out to stop the one-way traffic. It is fronting investors for a $1.4 billion-odd float that would see it join Australia’s top 300 stocks and lock in a big paper valuation for its family shareholders. It would also put an end to the one-way ASX-exodus following the loss of Sydney Airport, AusNet, Crown Resorts, CIMIC, OZ Minerals, Tassal, Virtus Health, Nitro Software and Senex Energy among others.
IPOs have also been out of favour; only one company, Chrysos Corporation, has raised more than $100 million to list on the ASX since January 2022So Redox is trying to break the drought. The company, pronounced red-ox, is exactly the sort of business that should be able to stop the exodus given its roots, track record and “defensive growth” pitch.
The business should – if history is any guide – be pretty bombproof, at least in the forecast period. Its pathfinder prospectus forecasts $1.24 billion pro forma revenue and $81.3 million net profit after tax for the nearly completed financial year, increasing to $1.33 billion and $97.4 million next year. The numbers make it clear Redox performed well through the COVID-19 pandemic and after.
Pricing discussions with potential cornerstone investors are heating up this week, and seem to be focused at around 14-times profit on a price-to-earnings basis. Fourteen-times the 2024 financial year net profit forecast would imply about a $1.4 billion market capitalisation, and if the Coneliano’s sold a 30 per cent stake at that price, it would imply about a $420 million IPO. [The family shareholders would retain the rest].It was also 10 times to 14.