- Insurance related company Greenstone plans to raise $809.7 to $984.2 million in an IPO next month.
- The current owners – Hollard Investments B.V. and the Casey Trust – will collectively hold between 42.0% to 42.6% of the outstanding shares at the time of listing.
- At the high range of the indicative price range it could be a little expensive, so it’s worth waiting to see how it performs on listing.
The latest prospectus to hit the market could turn out to be the biggest float of the year so far. Greenstone is an insurance company, and its parent South African based Hollard Investments, is looking to raise $809.7 to $984.2 million in an IPO next month.
First, let’s clear one thing up. Greenstone doesn’t call itself an insurance company, but a company that “designs, prices markets, distributes and administers personal insurance producers,” i.e. it white labels other insurer’s products to sell to people.
The good thing about that is that it does not have the same level of risk as an insurer would. All the claims risk is underwritten by third party insurers including owner Hollard, Hannover re and Swiss re. But it does deal in insurance products, so it is an insurance company of a sort.
You may not be familiar with the name Greenstone but you probably know Real Insurance, Guardian Insurance, Prime Pet Insurance and Australian Seniors Insurance Agency. You may have also heard of Choosi – an insurance comparison website. All these brands are owned by Greenstone, which says it has a “top two market share” in the Australian direct life insurance distribution market.
The offer
Details are below (notes can be found in the Greenstone prospectus on its website [1]).
[2]The current owners – Hollard Investments B.V.
and the Casey Trust – will collectively hold between 42.0% to 42.6% of the outstanding shares at the time of listing, and will enter into voluntary escrow agreements until two business days following the release of the Company’s FY16 results (in August 2016).
Hollard investments intends to be a long term investor in the company and states in the prospectus that it intends to retrain its shares until at least two business days following the release of the company’s FY17 results (in August 2017)– a full 12 months after the voluntary escrow.
Existing key executives will also hold between 2.5 million and 3.1 million shares.
Accessing the offer
It might be a little difficult to access the IPO unless you have a good relationship with a participating broker (which includes Macquarie, JB Were, Bell Potter, Ord Minnett, Wilson HTM and JP Morgan), as there will be no general public offer of shares.
There is also a priority offer, open to ‘select investors’ by invitation only and a general employee retention plan.
[3]The bottom line
The prospectus says that directors intend to target a payout ratio of 40% to 55% of Adjusted NPAT, “which is a measure of reported NPAT adjusted for non-cash basis changes and price adjustment revenue as well as certain other non-recurring items”. It’s not huge, but it’s something. And although owner Hollard says that it plans on being a long term investor, that doesn’t rule out a sell down post the 2017 results if not before.
On forecast FY16 earnings (NPAT) of $138.1 million, the company would be on a PE of between 15.5 and 19.0 times for the indicative share price range of $2 to $2.50. That compares to a forecast FY 16 PE of 16.8 for iSelect, which Greenstone says is its main competitor in the insurance comparison website space (but not the product space) and a forecast FY 16 PE of 20.3 for Medibank.
So it’s probably a little on the expensive side at the high end of the price range and might be worth waiting to see how it trades upon listing.
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