Ventia Services IPO: Would the dual listing boost its growth?

Highlights

• Ventia Services is the largest provider of Maintenance Services for critical infrastructure in Australia and NZ.
• The Company is planning to get listed on the ASX and the NZX to gain financial strength to pursue further growth.
• Ventia’s pro forma revenue is estimated to be $4.9 billion for the year ended 31 December 2022.

Ventia Services is a prominent essential services provider for public and private infrastructure in Australia and NZ. The Group is structured across 4 sectors, namely, defense & social infrastructure, infrastructure services, telecommunications and transport.

How much is Ventia planning to raise?

Ventia and SaleCo are aiming to raise $1.1 billion to $1.2 billion by issuing and making the sale of 382 million-399 million shares. The over-allocation option is exercised in full, with the final price set at an indicative price range of $2.75-$3.15 per share.

Ventia Services IPO: Would the dual listing boost its growth?

Ventia is likely to begin the trading of shares on the ASX and the NZX by 25 November 2021 on a normal settlement basis.

How can the raised funds help in its growth?

The funds raised from the Offer will be used to reduce existing debt levels of the Company and create a liquid market for the company’s shares. The funds will also provide Ventia with access to capital markets and additional financial flexibility to pursue further growth prospects.

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What are key strengths of the Company?

The infrastructure services industry is likely to grow as it is supported by many demand drivers that include population growth, size and the growth of the asset base, technology adoption, etc. Ventia has also shifted focus to the maintenance services that differentiate its service offerings and supports value proposition.

The Company has diversified predictable earnings, a qualified workforce and a high degree of forward visibility. Ventia has also incorporated trust to provide sensitive and complex projects across its sectors.

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Ventia has attractive growth prospects ahead as the maintenance services market is estimated to grow at a 5.5% CAGR from FY21 to FY25. It also expects its operating cash flow conversion to increase to over 90% in CY2022F.

What are associated risks of investing in the Company?

The investment also comes with many associated risks.

There can be a possibility of Ventia not being able to renew contracts with existing clients or get new contracts, which can affect its financial performance. Its performance is also contingent on its ability to draw and hold its crucial management and skilled labour to grow its business.

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As Ventia looks to enter into new markets, there is a possibility to enter into deals where agreed revenue is not sufficient to cover its costs of providing services or adequate profit margins.

Outlook

Ventia’s total addressable market is projected to be $62 billion in FY21F and is likely to grow at a CAGR of 5.5% from FY21F to FY25F.

The Company’s total revenue and NPAT are predicted to be $4.5 billion and $123.4 million, respectively, for the 12 months to 31 December 2021 on a pro forma basis. 

(NOTE: Currency is reported in Australian Dollar unless stated otherwise)