McGrath Estate Agents’ cashed-up position and opportunities to expand in a highly fragmented industry are said to be what have attracted investors to the first Australian float of a residential real estate chain for some time.
The company was one of two initial public offerings priced yesterday, with the other being IDP Education.
IDP landed at the top end of its range at $2.65 a share, as first revealed yesterday by The Australian’s BusinessNow blog.
McGrath priced yesterday at $2.10 a share ahead of its debut on the Australian Securities Exchange in early December, which was at the upper end of its range of its bookbuild range of $1.80 to $2.25 a share.
It equates to 8.8 times forecast earnings before interest, tax, depreciation and amortisation for the 2016 financial year.
As well as having no debt, the company has a premium brand, with 7.2 per cent of the NSW market and 3.2 per cent nationwide and the capacity to roll out more agencies.
It is being viewed by fund managers as a business that should be compared more to a retailer, where its exposure to the property market is similar to a homewares company such as Adairs or a furniture business like Nick Scali, in that a decline in property prices does not necessarily affect its sales volumes.
McGrath’s market value will be $282 million once listed, with the owners, including founding chief executive John McGrath, selling one third of their stake. The IPO is worth $129.6m.
Meanwhile, Seek holds 50 per cent of IDP and signalled it would sell out entirely if the IPO achieved a lofty price.