Dick Smith debuts on ASX


dick smithA lacklustre stockmarket debut by Dick Smith Holdings has drawn unfavourable comparisons with fellow retailer Myer’s poor listing four years ago.

Electronics store, Dick Smith, listed at $2.20 and rose as high as $2.32 in its opening minutes.

However it fell below its listing price before recovering to close at $2.20.

Like Myer, Dick Smith’s initial public offer (IPO) comes after being spun out of a private equity firm.

Anchorage bought Dick Smith for $94 million from Woolworths in November last year and has driven growth, with the business due to increase by 46 stores to 359 by the end of fiscal 2014.

Anchorage is set to make a fourfold return after Dick Smith started as a public company on Wednesday with a market cap of $520 million.

CEO Nick Abboud said while retail was a tough industry in Australia, he did not have to deal with overseas online competition like the fashion industry because people tended not to buy computers or TVs that way.

His chief focus would be aggressive growth, developing exclusive products through an online “click and collect” omni-channel experience and being faster and more innovative than the competition.

The main competitors are Harvey Norman and JB Hi-Fi.

“They are good, profitable electronics businesses but that is good motivation for our management team and staff to be just as good if not better,” he told AAP.

“We have a great brand that has been been around for 44 years, we are a billion dollar company that is well recognised with very good market share in computing and mobility.”

Dick Smith is forecasting sales revenue of $1.2 billion for fiscal 2014 and earnings before interest, tax, depreciation and amortisation of $71.8 million.

If they hit those targets Anchorage has an option of spinning out the 20 per cent of the company it still owns and Abboud and other executives can also sell stakes.

The fact Dick Smith is not providing projections for 2015 has raised concerns, although Abboud rejects that saying growth will ramp up then.

He points to the Reserve Bank’s policy of supporting a lower Australian dollar as something that was exciting and would benefit retailers and other non-mining industries.

IG market strategist Evan Lucas described the company’s first day as lacklustre and compared it to Myer’s $2.4 billion IPO, with its share price having been weaker ever since.

“A conglomerate like Woolworths can’t turn Dick Smith around after seven years and sells it for $94 million and then private equity can spin it out 12 months later for more than three times that,” he told AAP.



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