The upcoming BurgerFuel Worldwide [BFW.NZ] IPO poses some interesting questions.They are asking for 15M for a 25% of the company and value the whole shooting match at 60M. That is steep for a company with only 3M sales and a 250,000 loss.
20 outlets makes the unit sales an average of around $150,000 turnover a unit. Not good at all. You should be looking for at least $500,000 a unit for an outlet like that.
The 15M raised is going to be used on expansion and there is of course the possibility that the majority owners will want continuing cash inputs to keep growing.
I think at $1 a share you could pick up this puppy for less than that once we see continued losses mount.
There is alot of competition in this sector, in NZ and abroad, where BF intend to do business.
Having said that, the long-term future of the company could be worth a punt but I have reservations. I like companies to be making profits from day one and for expansion to be funded from profit.
I would avoid at this stage.
I wont be buying at the IPO, perhaps later.
See press release below
Burger Fuel looks for extra capital filling
NBR staff
Josef Roberts & Chris Mason
Fast-food franchise BurgerFuel is set to list on the NZAX and is looking to raise $15 million in capital.
The company is issuing 15 million shares at $1 each, with the option of purchasing additional shares at the same price in 18-months time.
The issue values the whole company at $60 million with public shareholders owning 26.7 per cent.
The remaining shares will held by staff, associate directors and the promoters of the offer, as well as the founder and managing director of the company Chris Mason and Executive Director, Josef Roberts.
Both Chris Mason and Josef Roberts have entered into stand-still agreements running for 12 months in respect of their shares.
The funds will be used to fund expansion into Australia, Europe and the US. At present, BurgerFuel has 19 outlets in New Zealand, and one in Sydney.
Prospectuses can be viewed at www.burgerfuel.com/shares
The company says it is taking an innovative and irreverent approach to capital raising, including a provision for 70,000 of its "VIB members" ("Very Important Burger Connoisseurs") to get the first chance to purchase shares.
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