Home Co and its brokers have a nice little carrot for potential investors.
While the retail property play is seeking to come to market with a 6 per cent yield, it is understood investors were told there were franking credits and tax losses that could lift the number as high as 8.6 per cent in year one at the offer price.
And given the search for yield, particularly among high net worth investors, and trading multiples of similar listed stocks, that one fact may well be enough to see the $300 million initial public offering fly.
That was the initial reaction as brokers blasted a pathfinder prospectus and presentation to potential investors on Monday, and told clients to start thinking about bidding for stock.
While it is early days, investors were quick to compare Home Co to Brett Blundy-backed Aventus Retail Property Fund, which is the closest comparable stock on the ASX-boards.
Aventus trades at a slightly higher yield to Home Co’s headline number at 6.1 per cent, while its property portfolio has a 4 year weighted average lease expiry.
Home Co wants to come to market with a WALE at more than twice that number at 8.8-years, with 83 per cent of the leases by income expiring in 2025 or later.
Home Co was pitched as the “owner, manager and developer of hyper-convenience focused retail and service assets”. Potential investors were told it had 30 properties and 21 operating centres, with a 370,000 square metre gross lettable area and 1.14 million square metres in total land holdings.
Home Co’s occupancy by gross lettable area was said to be 93.5 per cent, with 37 per cent of tenants representing supermarkets and other “daily needs and services”; 43 per cent leisure and lifestyle names like Spotlight and Anaconda; and the remaining 20 per cent homewares and electrical retailers such as Nick Scali and The Good Guys.
Home Co is seeking to raise $300 million for its IPO in a deal valuing the company at $637.7 million on a market capitalisation basis, as first reported by Street Talk on Monday.
Gearing is pegged at 34.3 per cent, which is within the stated 30 to 40 per cent target, while the offer was pitched at a 6.5 per cent premium to the adjusted net tangible asset backing per security on completion.
If successful, the company’s securities will start trading on the ASX boards on October 14. Retail brokers were to receive a 1.25 per cent selling fee as part of the offer, according to terms sent to potential investors.
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