Online electricals retailer AO.com aims for £1bn valuation at listing

January 30, 2014 Leave a comment

January 28, 2014 8:50 pm

AO.com aims for £1bn valuation at listing

By Andrea Felsted, Kate Burgess and Duncan Robinson

AO.com, the online electricals retailer, is aiming for a £1bn valuation when it floats on the London Stock Exchange later this year – more than treble the market capitalisation it was hoping to achieve just four months ago.

Several investors have told the Financial Times that the retailer, formerly known as Appliances Online, is now aiming to achieve a valuation of £1bn-£1.2bn, compared with the £300m estimated when it appointed banking advisers in September.

A market capitalisation as high as £1.2bn for AO.com would put the company on a multiple of about three times annual sales, the investors noted.

In comparison, it has taken 12 years for the market capitalisation of Asos, the online fashion retailer, to reach a multiple of five times its sales.

AO.com’s latest valuation indicates the increased interest among institutional investors in retailers with a strong online offering – after companies with internet-based businesses, such as Next, emerged as the winners in UK retailing over the Christmas and New Year.

Trevor Green, a director of Aviva Investors, said AO.com was one of the “standout” candidates in the growing list of UK retailers’ initial public offerings.

“There are going to be a couple of these companies coming to market, or maybe only one, where we really want to support the company long-term and therefore look to take a meaningful stake,” he said. “It’s about having an opportunity to really take market share, and build a presence in the market, and you can see that in AO.”

Clive Black, analyst at Shore Capital, said AO.com had similarities with Asos

in its systems and customer service. “We can see why there is a great appetite to try to get a decent bite size chunk of AO if it comes to market,” he said.

In March, Boohoo.com, the online fashion retailer majority owned by the Kamani family, is also expected to announce its intention to float. It is aiming for a market capitalisation of about £500m, according to people familiar with its plans.

AO.com and Boohoo.com declined to comment on Tuesday.

However, one potential investor warned that the valuations of online retailers risked becoming inflated because of comparisons with Asos.

“The trouble is, everyone looks at Asos,” he said. “Asos has proven its international business. That is the big difference”. He also warned that the number of retail floats expected in coming months might prove problematic for investors.

As many as 60 companies are hoping to tap investors for £15bn in funds by April, according to fund manager Threadneedle. Some 20 to 30 will be new companies hoping floating on the main London market or Aim.

On Monday, McColl’s, the newsagent and convenience store chain, said that it planned to float as early as next month, while Poundland and Pets at Home are also planning IPOs this quarter. Card Factory and House of Fraser could come later this year.

AO.com’s potential float will lead to a bumper payday for John Roberts, the group’s founder, as he and the group’s management own roughly half of the company.

AO.com had sales of £260m for the year to March 2013, although it is growing rapidly with sales expected to be closer to £400m this year. Its pre-tax profit in the year to March was £7.2m.

Filed under Macro Trends

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Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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