SAFAKNA TURKEY – Distribution network and power transformer manufacturer Astor goes public at TL 12.5 per share. Here is an x-ray of the public offering based on the astounding details and valuation multiples from Astor’s public offering prospectus, which will have a market value of around 12.5 billion TL…
Public offerings don’t stop. The number of new companies applying to CMB for permission to go public is growing day by day. In this regard, the public offerings that will take place in the first weeks of 2023 will also be an important indicator of the future expectations of the stock market. One such company will be Astor Energy. Astor Enerji has updated its prospectus it previously prepared on the 2022/06 balance sheets with a CMB-approved prospectus for 2022/09 late last week. Thus, the issue of Astor’s public offering is no longer on the table. In this case, we can start with the great points regarding Astor Energy’s public offering through the public offering prospectus…
Scope of the company; The company supplies oil-type transformers, dry-type distribution transformers, power transformers, special type transformers for industrial enterprises such as steel, cement, glass, paper, public or private institutions such as hospitals, shopping malls, schools, operating enterprises. in 72 countries in Turkey and the world, it manufactures and sells industrial type transformers, medium and high voltage switches, as well as transformer substations such as concrete and sheet metal kiosks.
The distribution of the company’s sales as of 2022/09 is as follows:
* Distribution transformers: 46 percent
* Power transformers: 31 percent
* Medium voltage switching products: 17 percent
* High voltage switching products: 2 percent
* Other products: 5 percent
In 2021, power transformers accounted for the bulk of sales.
Warehouse Precautions Taken
There is a noteworthy note in the company’s public offering prospectus about working capital requirements: while receivables in export markets have longer maturities, import markets have shorter maturities. For this reason, the company turned to the use of short-term bank loans to replenish working capital. This leads to an increase in financial costs.
The company increased its inventory with critical purchases of raw materials and semi-finished products to be able to meet growing demand in a timely manner through inflation protection, avoiding logistical problems and difficulties in accessing raw materials.
Short term debt item
1 billion 244 million Turkish lira of company bank loans is less than 1 year. This means 87 percent of the total financial debt of 1 billion 427 million Turkish liras.
As for the difference between this company and classical energy companies; In fact, as demand increases for energy companies, which are the fastest growing companies of this century, so is the market for companies that manufacture products for energy companies, such as Astor. There are also powerful and global giants in this sector. But many of the competitors specialize in certain products.
Competition in the industry is very tough
The global transformer market is estimated to reach $55.5 billion at the end of 2022 and $66 billion in 2025. In Turkey, the market size for transformers and switches achieved in 2021 is $2 billion, which is close to 37 billion Turkish lira at today’s exchange rate.
Leadership in the domestic market (with a 20 percent share) belongs to a global company. In second place is Astor (14%). The third (7 percent share) is again a global player.
In the total share of sales from production to the domestic and export markets of Turkey, the top two companies (with shares of 22 percent and 13 percent) are again occupied by global companies. Astor comes in second with 13 percent.
Turkey’s annual export of transformers and switching products is $1.1-1.2 billion.
In export sales alone, global companies are in the top three with a combined share of 43 percent, the domestic manufacturer is in fourth place with a 7 percent share, and Astor is in fifth place with a 5 percent share.
In other words, there is serious competition inside. However, there are practically no companies specializing in all areas of this segment. It can be seen that each global competitor holds the market leadership in a certain area. In this regard, Astor stands out as a company that competes in all market regions.
As for the price per share…
Astor Energy, which will be offered to the public at a P/K ratio of 9.21 compared to 2022/09 year-on-year net income, averages P/C 12.95 among its publicly traded peers in the energy market. Astor’s IPO has a PD/DD multiple of 43.32 compared to an industry average PD/DD multiple of 59.05. It will also have an annual market cap/net sales multiple of 2.16. This ratio is around 7.32 for domestic Astor peers. On a Market Cap/EBITDA multiple, its global peers average 11.59, while BIST’s energy companies average 25.33. On the other hand, Astor Energy’s PD/EBITDA multiple is 7.89 at the IPO price. The brokerage firm that estimated the price of the public offering said the public offering was made at a discount of about 24 percent. Based on the evaluation coefficients, the situation is as we explained above without any comment. The decision is up to the investor.
Market value 12.5 billion TL
Now let’s move on to the public offering information. 148 million units will be sold by apportionment during the demand gathering process for a public offering that Astor will hold on the stock exchange between January 11 and 13, 2023 under the code ATOR. With a public offering price of TL 12.5 per share, the company’s planned public offering price is TL 12.475 billion. So it won’t be a small IPO, Astor. If no additional sales are made, the total public offering will be 2 billion 187 million 500 thousand Turkish Lira in total. Gross TL 1 billion 850 million (net TL 1 billion 777 million) of this figure will be recorded as company income from public offering. A portion of 337.5 million TL (net 327 million TL) will be the income of the main shareholder. Nearly half of the proceeds from the public offering will be used to invest in manufacturing capacity and new products. 10-15 percent will be directed to investments in solar energy. 5-10 percent will be used to invest in maintenance of electric vehicle charging stations, and 20-25 percent will be used to strengthen working capital and pay off financial debts. The company plans to distribute 30 percent of the distributed profits to its shareholders in the form of cash dividends.
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