LONDON (Alliance News) - Online domestic appliances retailer AO World PLC Wednesday set the price for its upcoming initial public offering at 285 pence a share, meaning the company will have a GBP1.2 billion market capitalisation when it lists, well above earlier estimates.
Valuations for some of the retailers coming to the market this year have been soaring as the IPO market has recovered strongly over the past year, leading some analysts to suggest that some companies may be being over-valued.
If AO lists at GBP1.2 billion, that could propel it into the FTSE 250 in the next index review, even though it only made earnings before interest, taxes, depreciation and amortisation of GBP10.7 million on revenues of GBP275.5 million in the year to the end of March 2013.
Signalling the strong demand for the IPO, AO shares were up 3.7% at 393.875 pence in conditional delaings ahead of the flotation Wednesday. Unconditional dealings will start March 3.
FTSE 250-listed online food distributor Ocado, which has yet to make a profit, has a price to earnings ratio of 98.00, while AIM-listed ASOS has a price to earnings ratio of 93.30, according to data from Hemscott. The price set for AO implies a price to earnings ratio of about 112.
When DRL Holdings, as the company is currently known, announced its intention to float earlier this month, a person familiar with the situation had told Alliance News that the IPO could value it at up to GBP1 billion.
Still the company, which competes with established domestic appliance retailers like John Lewis Partnership and Dixons Retail PLC, has been growing quickly as the online electricals retail market has soared in recent years.
"I am delighted that our initial public offering has been so well received by investors. They have understood our business model and our potential," AO Chief Executive John Roberts said in a statement Wednesday.
"We hope to continue to grow our market leading position in the UK and we have the opportunity to bring our business model and customer focus to the online European electricals market," he added.
AO is expected to raise gross proceeds of GBP60 million in the IPO. The current sharholders - Roberts is the biggest with a stake of about 40%, and will have a 28.6% stake after the IPO - are selling GBP363 million worth of shares, it said.
UK convenience store and newsagent chain McColl's Retail Group Ltd Tuesday became the first in a line of retail businesses to list this year, pricing its initial public offering at 191 pence per share, giving the retailer a market value of GBP200 million. It is currently trading at 184.75 pence in conditional dealings.
Pet products retailer Pets At Home Group PLC and discount retailer Poundland have also confirmed they intend to float.
Media have reported that a host of other retail businesses are set to float sometime this year, including discount retailer B&M, department store operator House of Fraser, phones retailer Phones4U, and fashion retailer Fat Face.
Also Wednesday, German commercial real estate company Summit Germany Ltd was trading at EUR0.66 a share in early trading after listing on AIM at EUR0.63 a share, raising about EUR34.6 million in its IPO.
It is using the proceeds of the offering to fund property acquisitions.
"We are very pleased to join the AIM Market and to have received the support of institutional and private investors in the UK. Our listing on AIM will allow us to grow our property portfolio taking advantage of the opportunities in the German commercial real estate market to deliver attractive returns and dividends to our shareholders," Managing Director Zohar Levy said in a statement.
Meanwhile, rare and antiquarian book dealer Scholium Group said it intends to IPO on AIM. The company trades through its Shapero Rare Books dealership in Mayfair, London, which made revenues of about GBP5.38 million in the year to end-March 2013, and its South Kensington Books bookshop, which specialises in illustrated books and made revenues of about GBP550,000 in that year.
It wants to use the funds from its IPO to fund an increase in its stock, expand into the wider rare and collectibles market, and potentially fund acquisitions.
"Supportive capital from the London IPO market will allow us to take advantage of the attractive economics of the more general rare and collectibles market. High end dealers in these markets have limited access to capital and this will put us in a fantastic position to trade alongside these established specialist dealers to find and acquire high value items and collections beyond the reach of their normal capacity," Scholium Group Chief Executive Philip Blackwell said in a statement.
The company expects to have a market capitalisation of about GBP16 million when it floats, according to a spokesman.
Meanwhile, Imperial Innovations Group PLC said Circassia Pharmaceuticals PLC, the largest company in its portfolio, has set an indicative price range of 250 pence to 310 pence for its IPO in March, meaning Circassia will raise about GBP200 million.
Oxford-based Circassia focuses on developing allergy treatments, and its most advanced treatment, which is for allergies to cats, is entering late-stage trials. It announced its intention to flat earlier this month.
Imperial Innovations said its stake in Circassia would be worth between GBP72 million and GBP82 million at the indicative price range, compared to the last fair value reporting of GBP45.1 million at the end of July 2013.
Imperial Innovations shares were up 1.8% at 399.5 pence Wednesday morning.
By Steve McGrath and Rowena Harris-Doughty; stevemcgrath@alliancenews.com; @SteveMcGrath1
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