Any thoughts on the Guzman y Gomez ASX IPO?

7th Jun by Anton Crabbe

3 comments 248 reads

Only had a chance to have a quick look at their IPO.

On face value it looks expensive with a EV/ Pro Forma EBITDA of 32.5. Looking at an offer price of $22.0 per share and a market cap of 2.2bn.

They have some lofty growth goals of opening new stores, which is where the potential upside is.

Looks like an investor is paying for the potential upside, with future earnings already baked into the IPO share price?

Is anyone thinking of getting in on the IPO, waiting to see how they trade once listed, or just staying clear of them altogether ?

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About the Author

Anton Crabbe

Premium Member

Hi my name is Anton and I have been investing in shares for over 10-years. I have completed a Masters of Applied Finance and worked in the share investment world for a period and this is where I met Elio and Chris and found my way to Stockopedia. I have a long-term fundamental investment approach which is heavily driven by ratio analysis. For me, ratio analysis cuts through the hyperverbal out there by the investment media, and the endless investment fads and flavour of the month stock. As such I mainly focus on Quality and Value; but since I have started using Stockopedia, I have started to incorporate more Momentum factors into my stock analysis. Outside of investing you will find me playing a bit of cricket and golf, or out doing a spot of fishing. more »

3 comments

Anton Crabbe

11th Jun

Here is a great piece of analysis (click here) on the IPO from Roger Montgomery who is the guest speaker on our first Mastermind Webinar Series June 20th.

Grandslam

11th Jun

I listened to an interview with the CEO on the Equity Mates podcast. Extremely passionate guy, and an excellent communicator, in the same vein as Don Maj of Dominos. However, a couple thoughts:

I love their burritos, however I do think they are quite expensive compared to other fast food. A typical meal is getting close to $20. The food is good quality, but I have doubts that they have the capacity to increase prices much more without causing "demand destruction".

As a customer looking at their kitchen workflow, it does seem quite labour intensive. While other fast food chains have a couple to a handful of staff working at a time, Guzman has up to a dozen. So I think their cost base will always be fairly high, unless they can automate some tasks like Domino's have done over the years.

If they can't increase prices, they have to grow by increasing stores. They have some lofty goals, but the risk is that the new stores will start to cannibalise their existing store network.

Given the spicy earnings multiple the company is being IPOed at, I'm not going to take a position but would become interested if the valuation drops to a more enticing level.

Grandslam

11th Jun

I feel more positive about it after reading Roger's article, particularly reading how quickly the EBITDA multiple will come down. I don't think I'll be jumping in at the start though.

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Any thoughts on the Guzman y Gomez ASX IPO?

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About the Author

Anton Crabbe

3 comments

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