In today’s briefing:
- Trial Holdings IPO – Not Wholly Convinced but a Strong Market Should Help
- Sanyo Trading (3176 JP) – Small Secondary Offering as Banks Sell, More Later
- Reddit IPO Valuation Analysis
- Reddit IPO: The Right Time To Go Public At A Reasonable Valuation
- Macrotech Developers Placement – Large Deal, and Not Cheap Per Se
- Reddit IPO Valuation Analysis: $1B+ Revenue and Profitable Company in 2024
Trial Holdings IPO – Not Wholly Convinced but a Strong Market Should Help
- Trial Holdings (5882 JP) (TH) is now looking to raise up to US$259m in its Japan IPO, after having canceled its prior listing attempt last year.
- TH operates a network of retail stores that offer one-stop shopping under its everyday low price model, across a variety of daily necessities, food items and other products.
- We have looked at the company’s past performance in our previous notes. In this note, we talk about implied valuations in the IPO range.
Sanyo Trading (3176 JP) – Small Secondary Offering as Banks Sell, More Later
- Sanyo Trading (3176 JP) is a small specialised trading company (rubber, polymers, elastomers, etc). Niche, decent profitability/margins, highish ROE.
- Banks in the MUFG and SMBC family are selling. Norinchukin is selling a bit too.
- This is small in size but big in impact. 20% of Max RWF. 50d ADV. Unlike other recent, larger, offerings, this has no flow mitigants. But it’s cheap.
Reddit IPO Valuation Analysis
- Reddit plans to price its IPO between $31 to $34 a share, which would suggest equity value of US$6.0 billion to US$6.5 billion on a fully diluted basis.
- Our base case valuation of Reddit is implied market cap of US$7.9 billion or implied price of US$41.2 per share.
- Given the moderate upside relative to the IPO price range, we have a Positive view of the Reddit IPO.
Reddit IPO: The Right Time To Go Public At A Reasonable Valuation
- Reddit, an American social news aggregation, content rating, and forum social network, filed to go public. The company plans to trade on the NYSE under the ticker “RDDT”.
- Reddit was founded in 2005 by Steven Huffman, Aaron Swartz and Alexis Ohanian. The company is forecasted to surpass $1B in total revenue in 2024.
- They chose the right time to go public. I have a positive view of the upcoming Reddit IPO and looking forward to seeing them trade as a public company.
Macrotech Developers Placement – Large Deal, and Not Cheap Per Se
- Macrotech Developers (LODHA IN) is looking to raise around US$398m via a QIP.
- The deal here will be a well flagged one with LODHA’s board having announced its intention of raising up to INR50bn via a QIP earlier in Jan 2024.
- That being said, while representing just 3% of LODHA’s shares outstanding, the deal would be a large one to digest at 30 days of its three month ADV.
Reddit IPO Valuation Analysis: $1B+ Revenue and Profitable Company in 2024
- According to Pitchbook and their S-1, Reddit has raised ~$1.5B in equity financing. Their last private round, a Series F led by Fidelity in August 2021, was around ~$10B valuation.
- I derive a target valuation for Reddit using a ~8x EV/Revenue multiple on my 2024 estimates. The multiple represents a top-range multiple of the peer group.
- I arrived at my ~$9.6B target valuation, which implies 50% upside to indicative IPO valuation at the midpoint. I expect Reddit will trade above their last round valuation of $10B.
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