Traton IPO (Part 2): Valuation and Financial Outlook Just Reasonable

Isuzu-Volvo Strategic Alliance Follows Isuzu’s Purchase of Volvo’s UD Truck Brand

Equity Analyst, LightStream Research

Aqila Ali

Equity Analyst

Long-Short Analysis on Japan, Asia and the World

LightStream Research

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The <a href="https://www.smartkarma.com/entities/traton-se" target="_blank" data-smartkarma-citation="entities:28140:1" rel="noopener">Traton SE (8TRA GR)</a> IPO application commenced on the 17th of June 2019 and is expected to end by 12:00 noon, 27th June 2019, on the regulated market of the Frankfurt Stock Exchange (Prime Standard) and the regulated market of Nasdaq Stockhold (Large cap Segment). TRATON was formed in 2015 to aggregate <a href="https://www.smartkarma.com/entities/volkswagen-ag" target="_blank" data-smartkarma-citation="entities:21738:1" rel="noopener">Volkswagen (VOW GR)</a>'s heavy trucks and bus businesses (which were operating under the brands: MAN, Scania and Volkswagen Caminhões e Ônibus (VWCO)) into a single operation. The IPO price range is between EUR 27 to EUR 33 per share, with the IPO deal size expected to be around EUR 1.725bn, assuming a price of EUR30 (the mid-point of the proposed Offer Price range), with over-allotment shares being exercised as well.This insight covers TRATON’s background, its business model, reasons for going public, and the growth prospects and risks it faces in the market. The company’s attractive product portfolio seems quite competitive alongside the growing opportunities in its key markets of operation. Its focus on digitalisation services stemming from its interest in connectivity is a key distinguishing factor of this truck company when compared to other players like Volvo and Daimler. Although it seems logical for the market to focus on this truck company due to its creative business model, strong management team and excellent line-up of products and services, we are somewhat sceptical regarding the company’s ability to demonstrate strong stock performance, given the fact that its IPO seems solely intended to advance its parent company’s interests with modest growth prospects and a potentially peaking cycle.<div class="content-caption">Deal Specifics of TRATON’s Global Offering</div><table class="table table-striped"><tbody>
<tr><td colspan="2">Details:</td></tr>
<tr>
<td>Application Period</td>
<td>June 17th, 2019 - Noon, June 27th, 2019</td>
</tr>
<tr>
<td>Price Determination Date</td>
<td>June 27th, 2019</td>
</tr>
<tr>
<td>Result Announcement Date</td>
<td>June 28th, 2019</td>
</tr>
<tr>
<td>Dealing in Shares commence on</td>
<td>June 28th, 2019</td>
</tr>
<tr>
<td>Expected IPO price per share:  </td>
<td>Between EUR 27 to EUR 33 (SEK 288.92 to SEK353.12 calculated based on the exchange rate one day prior to publication of prospectus)</td>
</tr>
<tr>
<td>Number of Shares for IPO:</td>
<td>57.5m shares (50m base shares and 7.5m over-allotment shares)</td>
</tr>
<tr>
<td>Joint Global Coordinators: </td>
<td> Citigroup, Deutsche Bank, Goldman Sach Internationals and J.P.Morgan</td>
</tr>
<tr>
<td>IPO base deal size: </td>
<td>Approx.EUR 1.725bn (based on Median)</td>
</tr>
<tr>
<td>Major Shareholder  </td>
<td> Volkswagen</td>
</tr>
<tr>
<td>Use of Proceeds</td>
<td>
The Company will not receive any proceeds from the Offering.
The Existing Shareholder will receive the proceeds resulting from the sale of the Base Shares and from a potential sale of the Over-Allotment Shares
</td>
</tr>
</tbody></table><div class="content-remarks">Source: Company Disclosures, Prospectus</div>

The Traton SE (8TRA GR) IPO application commenced on the 17th of June 2019 and is expected to end by 12:00 noon, 27th June 2019, on the regulated market of the Frankfurt Stock Exchange (Prime Standard) and the regulated market of Nasdaq Stockhold (Large cap Segment). TRATON was formed in 2015 to aggregate Volkswagen (VOW GR)'s heavy trucks and bus businesses (which were operating under the brands: MAN, Scania and Volkswagen Caminhões e Ônibus (VWCO)) into a single operation. The IPO price range is between EUR 27 to EUR 33 per share, with the IPO deal size expected to be around EUR 1.725bn, assuming a price of EUR30 (the mid-point of the proposed Offer Price range), with over-allotment shares being exercised as well.This insight covers TRATON’s background, its business model, reasons for going public, and the growth prospects and risks it faces in the market. The company’s attractive product portfolio seems quite competitive alongside the growing opportunities in its key markets of operation. Its focus on digitalisation services stemming from its interest in connectivity is a key distinguishing factor of this truck company when compared to other players like Volvo and Daimler. Although it seems logical for the market to focus on this truck company due to its creative business model, strong management team and excellent line-up of products and services, we are somewhat sceptical regarding the company’s ability to demonstrate strong stock performance, given the fact that its IPO seems solely intended to advance its parent company’s interests with modest growth prospects and a potentially peaking cycle.Deal Specifics of TRATON’s Global Offering
Details:

Application Period
June 17th, 2019 - Noon, June 27th, 2019


Price Determination Date
June 27th, 2019


Result Announcement Date
June 28th, 2019


Dealing in Shares commence on
June 28th, 2019


Expected IPO price per share:  
Between EUR 27 to EUR 33 (SEK 288.92 to SEK353.12 calculated based on the exchange rate one day prior to publication of prospectus)


Number of Shares for IPO:
57.5m shares (50m base shares and 7.5m over-allotment shares)


Joint Global Coordinators: 
 Citigroup, Deutsche Bank, Goldman Sach Internationals and J.P.Morgan


IPO base deal size: 
Approx.EUR 1.725bn (based on Median)


Major Shareholder  
 Volkswagen


Use of Proceeds

The Company will not receive any proceeds from the Offering.
The Existing Shareholder will receive the proceeds resulting from the sale of the Base Shares and from a potential sale of the Over-Allotment Shares


Source: Company Disclosures, Prospectus

Volkswagen’s TRATON to Dual List Just to Provide VW with Financial Flexibility (PART 1)