SPO - Spotless Group Holdings

[peaceofmind]

new ipo added today

spotless group
private equity bought it for $720m, and now offloading for $1.7 to $1.9bn, an increase of 150%.

basically they stripped out costs, thats how the profit went up. but such cost increase benefits aren't sustainable. revenue has been stagnant around 2.5-2.7bn for the past 5 years!

Debt is a whopping $600m+

one wonders how this company ever made it to IPO stage...

one has to be careful of private equity opportunists.

 

[ROE]

Re: Spotless Group IPO

one wonders how this company ever made it to IPO stage...

one has to be careful of private equity opportunists.

That is the business model of private equity, they buy run down business where they can stripped out cost, ripped out asset they can sell like properties, land or part of the business for cash.
Draw out equity and replace it with debt then sell it back to the market for a juicy price

They bought Myer pretty much for nothing after they got all the inventories and sold their prime real estate

 

[Twindlelight]

Re: Spotless Group IPO

How do you get in on the IPO? It keeps saying broker firm allocation...so which brokers offer it...such a noob sorry =/

 

[DeepState]

Re: Spotless Group IPO

That is the business model of private equity, they buy run down business where they can stripped out cost, ripped out asset they can sell like properties, land or part of the business for cash.
Draw out equity and replace it with debt then sell it back to the market for a juicy price

They bought Myer pretty much for nothing after they got all the inventories and sold their prime real estate

Yep. And it's known that PE sourced IPOs do much worse than other forms. In your view, why does the market get sucked into this stuff and pay over the odds?

 

[peaceofmind]

Re: Spotless Group IPO

Yep. And it's known that PE sourced IPOs do much worse than other forms. In your view, why does the market get sucked into this stuff and pay over the odds?

artificially low interest rates, and quantitative easing allows all these stuff to come on

 

[ROE]

Re: Spotless Group IPO

How do you get in on the IPO? It keeps saying broker firm allocation...so which brokers offer it...such a noob sorry =/

most public IPO listed on the ASX you can apply for it by send them a cheque.... some other IPO they give to a banker and brokers to do the deal and if you are the brokers client you get the allocation if you want to take it up.

 

[skc]

Re: Spotless Group IPO

Yep. And it's known that PE sourced IPOs do much worse than other forms. In your view, why does the market get sucked into this stuff and pay over the odds?

Some symbiotic relationship between the PE funds and the broker industry?

 

[piggybank]

Re: Spotless Group IPO

Spotless Group Plans $1 Billion IPO

Spotless Group will raise approximately $1 billion in an initial public offering after a rapid turnaround for the company since Pacific Equity Partners took the cleaning and catering contractor private in 2012. According to its prospectus lodged on Monday, the Melbourne-based services firm will offer new and existing shares at a price of between $1.60 and $1.85 per share. The bookbuild and final pricing are scheduled to take place on May 20 and May 21.

Spotless chairman Margaret Jackson, a former Qantas chairman, said she is pleased to bring an iconic Australian company back to shareholders. "Spotless is a strong business, with multi-year contracts and a large number of long-term customer...

http://www.smh.com.au/business/spotless-group-plans-1-billion-ipo-20140428-37dai.html

 

[Ves]

Re: Spotless Group IPO

Yep. And it's known that PE sourced IPOs do much worse than other forms.

Didn't take very long after PEP's final sell down for this to join the club.

Been rumours that they stripped out costs (good for short-term profits) but it certainly catches up with a company in the long-run when the cost base becomes unsustainable and those costs need to be added back in.

 

[skc]

Re: Spotless Group IPO

Didn't take very long after PEP's final sell down for this to join the club.

Been rumours that they stripped out costs (good for short-term profits) but it certainly catches up with a company in the long-run when the cost base becomes unsustainable and those costs need to be added back in.

The downgrade itself wasn't actually that bad (i.e. doesn't seem to warrant a 40% fall).... perhaps the market is running scared after DSH that they had been done by another PE dressed-for-sale business.

 

[VSntchr]

Re: Spotless Group IPO

The downgrade itself wasn't actually that bad (i.e. doesn't seem to warrant a 40% fall)....

Yes agree, premarket I thought maybe it would fall back to the 180 level it was drifting around earlier in the year.

perhaps the market is running scared after DSH that they had been done by another PE dressed-for-sale business.

Which was the conclusion I drew upon closing my small bounce trade for a loss.

 

[Ves]

Re: Spotless Group IPO

The downgrade itself wasn't actually that bad (i.e. doesn't seem to warrant a 40% fall).... perhaps the market is running scared after DSH that they had been done by another PE dressed-for-sale business.

Yep, very possible. But when you say at the AGM barely a month ago "FY16 profits will be materially higher than FY15" (my paraphrasing) it doesn't look that great.

I'd also argue failed bid costs aren't a one-off charge, they're a cost of business, and a sign of increased competition.

If there are lower than expected synergies (possible it's just delayed however) their grow-by-acquisition strategy is doubtful. And it's really just a no-growth company, over-spending on acquisitions, with a pile of debt left to service.

Also saying market conditions are getting tougher... does that mean this listed at above average cyclical earnings?

It's hard to say what price would do in the short-term, but seems fundamentally like there's a few doubts adding up now.

edit: Besides, given the large range of services this company offers, it seems like it'd be a real tangled web for anyone to manage as a whole.

 

[notting]

private equity bought it for $720m, and now offloading for $1.7 to $1.9bn, an increase of 150%.

That is what you should use to get a feel for what it's probably really worth.
$720m.
Like the rest.

Private equity holding something rearranging it according to what best cooks the book, usually with twice as much debt. Then offload it to filthy brokers to offer to their clients too busy to understand. There are no miracles behind the private equity curtain. A business does not double, triple or quadruple in value, in 18 months or what ever it takes for the public to forget what a peace of crap it was when it had to disclose everything as a public entity - whilst maintaining a model little different to what it was just a short time prior!

Is that hard to understand?

Market cap at $1.42 is still a demented 1.6 billion.

 

[McLovin]

Re: Spotless Group IPO

I'd also argue failed bid costs aren't a one-off charge, they're a cost of business, and a sign of increased competition.

This. If you're in the business of tendering for business it's pretty hard to justify it as a one-off charge.

If there are lower than expected synergies (possible it's just delayed however) their grow-by-acquisition strategy is doubtful. And it's really just a no-growth company, over-spending on acquisitions, with a pile of debt left to service.

And this. They bought ~$300m+ of revenue in the last year. USG is probably lower margin than SPO, maybe more like SKE. AE Smith probably sits somewhere, margin wise, between the two of them. It looks to me like they're just buying earnings. They were pretty scant on the details of what they're buying. All they told us was how much revenue the companies have. So it's pretty hard to really know if they're adding value.

 

[skc]

Yep, very possible. But when you say at the AGM barely a month ago "FY16 profits will be materially higher than FY15" (my paraphrasing) it doesn't look that great.

They did maintain that revenue will be "materially higher" (my bold). Way to rub salt into investors' wound.

I'd also argue failed bid costs aren't a one-off charge, they're a cost of business, and a sign of increased competition.

If there are lower than expected synergies (possible it's just delayed however) their grow-by-acquisition strategy is doubtful. And it's really just a no-growth company, over-spending on acquisitions, with a pile of debt left to service.

Also saying market conditions are getting tougher... does that mean this listed at above average cyclical earnings?

It's hard to say what price would do in the short-term, but seems fundamentally like there's a few doubts adding up now.

edit: Besides, given the large range of services this company offers, it seems like it'd be a real tangled web for anyone to manage as a whole.

I agree with this. But I am very surprised to see that the market would all of a sudden collectively realise this.... especially when it was all smooth sailing 4 weeks ago. I expected this to crash 15%, not 40%.

Private equity holding something rearranging it according to what best cooks the book, usually with twice as much debt. Then offload it to filthy brokers to offer to their clients too busy to understand. There are no miracles behind the private equity curtain. A business does not double, triple or quadruple in value, in 18 months or what ever it takes for the public to forget what a peace of crap it was when it had to disclose everything as a public entity - whilst maintaining a model little different to what it was just a short time prior!

Is that hard to understand?

Market cap at $1.42 is still a demented 1.6 billion.

Not all PE deals are duds, and I'd guess the PE turnaround timeframe is probably a key variable/indicator. Something like Link (LNK) which PEP held over 5-6 years might have a bit more stability than the window dressing brigade of DSH/MYR/GFY . And one has to wonder what's next? My guess is MYO.

Will be interesting to read some of the analyst hindsight commentaries on SPO.

 

[Boggo]

Hasn't been much on this stock for a while.

It popped up in my weekly scan on the weekend so I had a look at the depth etc.

One bidder for 636 million ???

 

[Boggo]

All is revealed !

 

[jjbinks]

SPO seem to be doing well since earning news in mid august!

 

[System]

On August 30th, 2019, Spotless Group Holdings Limited (SPO) was removed from the ASX's Official List in accordance with Listing Rule 17.11, after security holders resolved to remove SPO from the Official List for the reasons set out in the company's announcement dated 25 June 2019.

 

[SteveC1961]

On August 30th, 2019, Spotless Group Holdings Limited (SPO) was removed from the ASX's Official List in accordance with Listing Rule 17.11, after security holders resolved to remove SPO from the Official List for the reasons set out in the company's announcement dated 25 June 2019.

Hi,

I missed selling my shares as I was overseas. Any ideas on how i find a buyer now?

Thanks