No surprise those with the lead brokers seem to have had a better allocation, mine was scaled back to the minimum. Deja vu of Edsion's Contact sell down. Hope Tegel has a better run than Contact's.
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My bid got completely scaled out.. First time ipo, how easy would it be to get a bid in at opening near the listing price?
This from Chris Lee's newsletter,for those who don't subscribe, outlines the absurdity of the Tegel IPO -
THE Tegel share float, selling shares in a brand that is well understood, and where matters like sales margins and market share are all reasonably predictable, is at the other end of the scale, diametrically opposed to Diligent.
Whether it continues to succeed, or fails, will have nothing to do with historical scandals, colourful investors, penny dreadful punters and regulatory interventions.
But I have to say the process of pricing the shares and allocating them has been as unnecessarily complex as any process I have seen.
Let me justify that. Consider this.
New Zealand brokers, on behalf of clients, were asked to bid for the shares by noon last Friday, and to bid at price bands of 20 cents, beginning at $1.55, then 1.75, 1.95, 2.15, 2.35 or $2.50.
A broker believing the shares were worth somewhere between $1.75 and $2.00 might bid for a large number of shares at $1.95 and a smaller amount at $2.15.
This demand was then handed to the Australian lead brokers, Goldman Sachs and Deutsche Bank, on Friday.
As an aside, Goldman Sachs and Deutsche Bank have left New Zealand, unable to achieve the market successes they had planned. (I think I know why they failed.)
On Monday and Tuesday of this week, the Australian brokers and institutions did their bidding, and then the lead brokers had the right to set any price they liked.
For example, they could have set a price of $1.56, which could have meant that all New Zealand bids at $1.55 were unsuccessful. They had our bids days before they bid, our pricing perhaps held in sealed envelopes behind Chinese walls, perhaps not.
Of course the Australian lead brokers did not exploit this anomaly. Demand was insufficient at any price higher than $1.55. But they had the right to do so.
What nonsense. The lead brokers, indeed all brokers, and all institutions should have bid simultaneously and no one should have had the right to set any price other than the bracketed figure required of New Zealand bidders.
Book-builds and differentiated bidding processes are the bane of retail investors. Any process that allows lead brokers to ‘’play God’’ is an ugly process.
Perhaps it is unrealistic to expect today’s investment bankers to simplify things – their fees might be affected if things were too simple. Complexity breeds confusion and confusion has to be clarified. For a fee.
How many investors would prefer to dump ‘’book builds’’ and revert to the days of an underwritten issue at a known price?
Let the underwriters set the price and let the price be known before investors are asked to invest.
How many potential investors did not bid because they feared the lead brokers’ intervention?
That's a wishbone question. I'm picking that it'll come out hard (maybe up 15- 20 %) and then fade back in the later session to $165 - 170. Price is pitched at the bottom of their indication BUT this was because bigger retail investors / instos showed no love for anything higher.
Just my guess...
SP will open above $1.70 and will stay above it
Punters are so happy at the moment and it seems nothing can go wrong
When Tegel finally trades it will be a boomer. Punters have been lucky with the timing of this float.
Will be $2 by Christmas - by hook or by crook they will see that it is.
How about their financial strength? Do they have strong fundamentals?
http://www.theaustralian.com.au/busi...50543c2c85008a
Affinity Equity Partners lowers Tegel Foods IPO valuation
Thank you Winner for your response.
http://m.nzherald.co.nz/business/new...ectid=11615455
According to the above link,
More than $130 million of the cash raised will be used to repay bank debt, while up to $163 million will repay shareholder debt. The remaining $22.5 million to $25.3 million will cover IPO costs, including an $8 million bonus for senior management.Following the IPO, the company's net debt will reduce to $119.5 million.
Do they use imported maize as well? Can they get entire requirements of maize locally? Why are they making use of IPO funds to pay bonus?
Almost all feed raw materials are imported. They hedge the prices but have exposure here
I was sick this week and didn't get organised to ask my broker for an allocation. I'm wondering whether to try to apply on the open pool. Anyone else doing that? Or am I misreading it. Is there an open pool? It looks like it but I'm unclear on whether I still have a chance to get shares???
I'm reading it again and it looks like I don't have a chance to apply now. Rats
not interested in this one. maybe I'm just chicken? :t_up:
Feed sources include maize, wheat (esp if there is a damp harvest in Australia), sorghum, other grains as well as soy meal. As producers here are dependent on imported feed, they are competing with other markets particularly China for feed to grow poultry.
A bumper dry harvest in Australia can result in the cost of feed rising as more of the wheat crop is destined for milling grade rather than going into the secondary feed market. Wet conditions at harvest can see more grain fail to make milling grade and end up as feed.
It can also foment instability elsewhere as it can cause the price of wheat to spike. Revolutions have been sparked by the rise of the cost of your daily loaf.
I reckon if you like food producers why not buy Scales similar yield and a better growth story.
Currently, global grain market is well supplied. Inventory level is high. Many countries want to produce more grain locally. Tegel should benefit from Lower grain prices. Long term investors should study their business model, market share, financial stability and long term value etc.
It seems to me the money raised by this issue is going to the existing shareholders & there banks..it is not going to fund expansion of the business. The Private Equity funds selliing shares will in fact own less than 50 percent after this listing..as Winner says in about a years time it will be interesting to see how many shares they have left.
The question is..if it is a such good business, why are they selling?
I think its quite simple really,they are selling because they can get a premium over what they paid.
Lets not forget that (without all the hype) this is a foodstuff business,a defensive stock maybe when things aren't so good on the market,like utilities. It isn't a growth story!
We should not worry much about who is selling and buying as long as we see huge potential in the mid and long term. I would like to find out and estimate their future earnings for number of years from five years to 10 years. Earnings are the profit a company makes, and in the long run no company can survive without them. Of course there will be some lean period for any industry. What matter to me are future earnings.
In the short run, there could be some affect on share prices when funds try to liquidate their holdings. As Kizame said, we should not forget this is a defensive stock. Therefore, there could be some support especially in 2016/17. As I have value approach, I would like to consider great value and future earnings. It is time to study their story before taking any decision.
I consider Tegel to be a "Comsumer Staple",of which we are very short of selection on the NZX.
This sector is composed of companies whose primary lines of business are food,beverages and other household lines.
These types of companies have historically been characterized as noncyclical in nature.
Unlike other areas of the economy,even during economicaly slow times [in theory]demand for the products made by consumer staples companies does not slow down.
So lets compare the price of chicken with its competition.
Chicken...$10.96/kg.
Pork.........$13.28/kg
Beef.........$18.22/kg.
Lamb........$19.29/kg.
I also find it interesting that NZ's chicken consumption is increasing year on year.
Tegel is a welcome addition to anyone's well balanced portfolio/diet.
It is often overlooked when comparing Tegel with SCL,SEK and DGL, that those companies only have one crop a year,were as Tegel is breeding chicks through out the year.ie instead of one stock turn they enjoy a good number of stock turns per year.This is a better use of capital and results in solid year round cash flow.
A bit concerned about the big boost in profits the year before the IPO - smells of dressing up the turkey.
Also don't believe the hype around possible overseas expansion - it's chicken, so how is Tegel going to have a point of difference in a global marketplace?
Revenues have been pretty stable over a period of time, so this is definitely not a growth opportunity. Margin seems to be very slim, see this as a defensive stock to have for economic downturns - chicken is a substitute good for more expensive meats, so should see consumption increase in poorer economic conditions.
Verdict: Private Equity selling at the top to gain maximum value. Avoid at this stage, but watch closely over the next 12 months.
I don't think people eat more chicken when they're poor. Meat is the expensive thing you stop eating when you're struggling.
It's priced at the bottom of the range because that the maximum price the sellers think they will be able to clear their allotments for. They will of course build in a slight discount to make the offer attractive after the IPO.
I'd never give advice on an internet forum hah!
Re lew's note above
Revenues have been pretty stable over a period of time, so this is definitely not a growth opportunity. Jeez lew growth last 3 years have been 6.8%, 8.8% and 3.3% this year. That's better than stable
Margin seems to be very slim. EBITA margins pretty reasonable and not very slim, been >10% last few years with this year 12.9% (Gross margin by the way is 23%/24% which I agree isn't fantastic
chicken is a substitute good for more expensive meats, so should see consumption increase in poorer economic conditions. Hope you right there lew - could call it a growth initiative - adding more to the growth rates mentioned above
A bit concerned about the big boost in profits the year before the IPO - smells of dressing up the turkey. Reading the papers again to come to that conclusion have we lew my old mate. The increased ebita (profits) has been driven mainly by increased sales off set to some extent by increased costs (growth initiatives they say) hardly the stuff of dressing the turkey up.
Lew - did you bother read/study Pages 56-60 of the Disclosure Statement?
Whatever Tegel will be a great investment in the short to medium term. Maybe even for the longer term if things go their way. I reckon the share price will be over $2 by year end
Nope, i didn't read pages 56-60, but I also didn't say those things :)
I think your rebuttal might be aimed at Grunter ;)
Affinity remain significantly invested, they've sold only about one-third of their equity, retaining 45 per cent and that will be escrowed until after Tegel releases its 2017 results. Unless the shares are trading 20% higher than their IPO price when Tegel releases its half-year numbers. Affinity's interest is closely aligned to a strong sp, and that'll be driven by good earnings.
For the record, I've not done any in depth research into tegal because it doesn't fit my strategy at the moment and I don't like the idea of supporting animal cruelty.
I think time to come many countries may implement some sort of animal welfare.
http://ec.europa.eu/food/animals/welfare/index_en.htm
Animal welfare
If really interested in chicken, could have bought Proten on Unlisted. From 70c to 110c over the last year, plus divvies.
Well we enjoyed eating Bambi.
Larry the lamb was nice with mint sauce.
Daisy the pig went down a treat.Made great bacon too.
Timmy the Turkey was enjoyed by all on Christmas day.
Stevie the Steer we have not managed to catch ,so we will have to eat the chooks for awhile yet.
should list well I think
Any company which has a key input cost associated with a volatile commodity is exposed....
Have come to the conclusion I don't yet have a buy/sell opinion on Tegel. There are other players in the NZ market that operate better than them but that doesn't preclude the IPO from being a success.
I think it wont do too bad - prob get up to around $2 - $2.50, giving a nice div too. There is definitely a fair few signs private equity has pulled what they can out of things - e.g. selling factories and leasing back. But what is left is substantial, Tegel looks to be a solid business and good value at $1.55 with the private equity continuing to hold a big chunk. We can thank the poor buggers who bought DSE for the low strike price!
A 7% CAGR for a company supposedly undertaking a "growth" phase is pretty much flat. Given chicken consumption has increased by 6% overall, what can we say that Tegel itself has brought to that revenue growth, other than just industry-wide growth? How about stretching further back - revenue in 2009 was $465 million, and dropped to $410 million in 2010. You could say revenues have actually been recovering over the last 5 years.
NPAT was $12.8 million in 2009 and $22.6 million in 2010. Given NPAT has been -$12.1 million in 2013, $14 million in 2014, $8.7 million in 2015 and forecast $10 million for 2016, this does not indicate to me a growing company.
EBITDA is expected to increase only $10 million between 2016 and 2017, yet NPAT is expected to increase to $43 million - this indicates to me the primary reason for the NPAT increase is due to 1) interest expense reduction (i.e paying down $130 million in debt with cash raised in the IPO) and 2) tinkering with depreciation. Will paying down debt and chopping some of the interest expense contribute to revenue and NPAT growth? I don't see this as being likely, and you will probably find NPAT will just fluctuate around a new range, but not trend up long term.
PEP sold to Affinity for around $600 million in 2011, and the IPO will give a market cap around the same figure. So the company's value hasn't increased between 2011 and now.
Affinity purchased Tegel through an LBO, so although they are retaining a 45% stake, we don't really know what capital they put up to actually buy Tegel, and thus their real return on their investment. No doubt it will be pretty healthy.
I think that Tegel is a mature company that is a defensive yield play (estimated dividend between 4.5% and 7%), not a growth company.
If it is not a growth company it is wise to stay with value. I believe we should be able to find out more about this company during next 10 years. Then we can see whether it is a growth company or not.
Grunter - maybe, just maybe, Tegel as the brand leader helped drive the demand that saw industry growth at 6%
Good marketing increases the size of the marketing and hopefully a bigger share of the bigger chicken pie as well
Ok, lets go back to basics and in light of some data in the prospectus and posted previously
Chicken...$10.96/kg.
Pork.........$13.28/kg
Beef.........$18.22/kg.
Lamb........$19.29/kg.
First off, some of these numbers are a bit funky, I can buy good cuts of beef/lamb at my local butcher at less than quoted.
Look at pg 11 of this (http://www.mbie.govt.nz/info-service...201.6%20MB.pdf), global growth in poultry/pork while beef/lamb have stayed static over the last 50yrs.
Now, the cost to produce grain fed protein is entirely dependent on how efficient the animal can convert grain into muscle tissue. Us humans have bred chickens over the last 70 years to be extremely efficient at this process. Pigs are on a similar scale, but due to the scale of the NZ industry (and we consume only a small amount of pork to our peers) it sits at a higher cost. See pg 15. The poultry sector is growing entirely due to the fact it is cheap - the demand only exists as the supply is low cost and abundant. For the producers it is a race to the bottom as any increase in rev can only be won due to offering a lower price point - makes it difficult to increase EPS.
Contrast this to Scales (and there was some really lazy reporting around this recently) where the growth has been with demand led sales. Globally the price of pipfruit is up, the x-rate was in their favor and them swinging big on the Chinese market has paid off nicely.
FYI Some comparisons would be to
NYSE PPC - Pilgrims Pride PE 9.5
NYSE TSN - Tyson Foods PE 19 (overbought) though is diversified with pork/beef divisions
NASDAQ - SAFM PE 12.2
The prices quoted were based over a year.
The retailers were Pak'n'Save and Countdown.
SCL,SEK and DGL only have ONE crop a year while Tegel are breeding chicks year round.This means better use of capital,and improved cash flow.
SCL,SEK and DGL are subject to weather conditions.
According to some analysts still TSN is a buy. May be growth players are betting it but not value investors.
http://sonoranweeklyreview.com/tyson...-bell-nysetsn/
Tyson Foods Initiated at Argus Research with Buy Rating, $80 Price Target; Shares Flat Pre Bell (NYSE:TSN)
In any industry well-managed companies having strong balance sheets and strong outlook will outperform others in the mid and long run. I believe we could find some great winning poultry stocks in global markets in the coming decade.
PPC is a weak sister in the group. Still it may pass its 52 weeks high due to group affects.
www.unlisted.co.nz
Generally are thinly traded companies, and rather illiquid. Like anything, some wheat, some chaff. Some good companies like Skyline listed there.
Proten are a kiwi company operating in Australia - basically growing chicken under contract. Unlisted profile - http://www.unlisted.co.nz/uPublic/do...%20Profile.pdf
I relay like properly made chicken and eggs than other meat varieties. We can eat New Zealand Chicken without any doubt and second thought. They are quality chicken and eggs. I specially like corn-fed Turk’s chicken. It is 100% New Zealand owned and has produced eggs and poultry for over 40 years. Thanks to the environment and the feed, their birds consistently out-perform the leading brands in independent quality tests.
I never had any quality issue in their chicken during last 10 years. Do you think that they also will list their shares in the New Zealand stock Exchange?
http://m.nzherald.co.nz/business/new...ectid=11624438
Strong demand for Tegel shares
In the USA market, chicken stocks are in full swing. SAFM rose by more than 4%.
PPC went up by more than 12% on a huge volume despite recalling their chicken products. There should be something that we don’t know.
https://nz.finance.yahoo.com/q?p=fin...ahoo.com&s=PPC
http://www.globenewswire.com/news-re...-Dividend.html
Pilgrim's Pride Corporation Announces Declaration of Special Dividend
http://edition.cnn.com/2016/04/26/he...contamination/
Pilgrim's Pride recalls 4.5 million pounds of chicken
Big day tomorrow
At least $1.75?
1.62 easing back to 1.58.
Disc. Holding.
id say 1.83, followed by close 1.71, heading up to $2 in the next month
I don't know where the price will be.
Was so wrong with the $1.55 issue price.I was expecting $1.95.
I was very lucky to get a good allocation,so will most probably hold long term.
Partly surprised at how cheap it was listed, but then again, shows nobody (really) wanted to back a cent more, could be good for the stags, but overall sentiment hasn't changed for me... good luck to all holders... lets hope they can achieve what they want to achieve... (alarm bells should be ringing if PE firm decides to sell soon after escrow ends)
We could expect some active trading in this stock. It is nice to see some food stocks are listing in the NZ exchange. It should follow the trend of (FRM.AX).
There is a private equity involvement in this company. It is wise to study that part as well.
http://www.stuff.co.nz/business/indu...y-analysts-say
Tegel's sharemarket float could go either way, analysts say
http://m.nzherald.co.nz/business/new...ectid=11631887
Brisk demand on cards for Tegel float
Good Luck!
What time does it list?
Lists at 11am nzt. Is there any way to see order depth pre-market?
Bids
Quantity No. Price
9,500 2 185
10,000 1 175
5,500 1 170
15,500 4 160
229,225 4 155
10,000 1 100
Asks
Price No. Quantity
Thanks 777
Interesting range. An optimist there at $1!!!
Thanks, yes ANZ are now showing all the bids. They weren't when I looked earlier.
I wasn't organised to get an allocation so I will have to buy today as close to 155 as possible. Sometimes the shares do an initial surge and then dip so I will be patient...
Wow looking at the updated depth, doesn't look like we'll be able to get any orders in anywhere close to 155
You can't rely on that as I've often found that when the share opens it all changes very quickly!
But yeah there are a lot of high bids in there and people asking $1.80+
But a lot of the institutions will be bidding $1.55 and they don't always show up I've noticed
Match price 179. I wonder how reliable an indicator that is
I won't be bidding that much!
Any guesses on close price for today, I'm picking 168...
im picking over 1.80
When I went to place my order ANZ offered me the opportunity to buy at the current price of 150 ;)
Did you get it tango?
Almost 7% of the company changed hands today, with sells outweighing buys 4:1, been much the same theme the whole day... will be interesting to see what happens over the next few days... will the retail investor panic or will they hold and hope?
Started up 11%, now up barely half of that, with ... is this house of cards already falling apart? ;);)
Listing premium pays for a few free chicken dinners...small fish, (chickens ?) are sweet.
I didn’t shell out for this one (too chicken). New listings almost always get a bump on the first day but I was still surprised to see it happen in this climate. Tegel’s growth plans look to be heavily reliant on the performance of overseas economies. Hopefully today’s trend can’t be extrapolated out to 6 or 12 months because there will be a lot of unhappy punters with egg on their faces. Loving all the puns by the way...