Flotations Worth a Punt
I've made quite a bit over the years on new issues. They are very hard to weigh up. But, as long as you buy a decent business and you can see where the upside in profits could come from, you could be onto a winner.
There are quite a few companies just floated or about to float. I often find it's best to invest in the ones that don't get so much publicity.
For example, another gym company is about to float, garnering loads of press. I'm not that keen on the gym sector. People get bored. Sign up to the gym with all good intentions but inevitably get lazy and quit.
Go Compare is another coming to the market, but where is the growth coming from?
I prefer ones that don't get so much coverage - and ones where I can see where the growth is - and there are a couple I fancy.
Hollywood Bowl has just floated on the market with a valuation of £240 million. I'm quite bowled over with this one and intend to tuck this away in an ISA for two or three years as I can see some decent upside.
Where's that coming from? It's the largest operator of bowling alleys, currently has 54 operating mainly in out of town shopping areas, often next to a cinema. It seems keen to refurbish venues which quickly lifts revenue. Revenue and profit is growing fast - revenue was up 25% in the six months to March this year.
How's that going to grow some more? Of course, new venues will be bought. Indeed, contracts have been exchanged on two new centres.
But there is massive growth ahead by simply getting customers to visit bowling centres more often using incentives and making them a cool place to hang out. More visits means more spending on food - 28% of revenue comes from the food offering with 23% from amusement machines.
The menus look rather attractive, selling the kind of food people want at reasonable prices. And it seems to me there is scope to raise prices in the food offering too. The kids menu looks good as the company wants to promote bowling as something for all the family. As the alleys look better after refurbishment, prices can be raised.
Management looks experienced - the £240m float price looks reasonable so I am probably in for some shares!
You might think a waste management company is a s*** choice to invest in. But the float of Biffa sometime in October looks promising. It's the second biggest waste management company in the UK by revenue. Revenue was £927m with operating profit a respectable £62.5m in the last year.
The real question is, where is the growth coming from as surely there is only a finite amount of rubbish? Well, the company reckons it is coming from growth in population and regulation which specifies separate collections and treatment. It also thinks it can lower its costs in disposal. And it is also buying up other companies.
I buy this story and so I think I'm probably going to buy the shares when they launch on the market. Given its profits it is likely to get entry to the FTSE 250 probably in January so funds will buy in.
At the very worst if it goes down you can say to yourself: "That was a rubbish stock pick".