Companies in the news ... and how they were assessed
Fever-tree: Cheers!
Since floating in November 2014, the “posh mixer maker” Fever-tree has enjoyed a “remarkable shares run”, said Joanna Bourke in the London Evening Standard. But is the fizz starting to go flat? The soft drinks company suffered “a rare hiccup” last week after co-founder Charles Rolls cashed in some £73m worth of shares, said Rob Davies in The Guardian. The “hefty sale” left the company’s stock down 2% at £17.12 – but that’s still nearly 13 times its float price. Fever-tree, founded in 2005, is now worth more than its “170-year-old drinks rival Britvic, and some three times as much as the Debenhams store chain”. The company embraced “luxury status” and made much of the “exotic origin” of its ingredients, but it was a “serendipitous resurgence in gin” that really put Fever-tree on the map. It has “ridden the crest of this alcoholic wave like no other company”. Rolls (pictured, right), who previously revived the Plymouth Gin brand, once observed that “you’ve got to feel a little sorry for Schweppes”, which, like Britvic, was caught napping by the botanics renaissance – both are hoping to regain ground with new premium ranges, but Fever-tree may be tough to squash. It recently announced that its 2017 results will be “comfortably” ahead of forecasts, “indicating it is still very much in the ascendancy”.
Alfa Financial: all hype?
Alfa sells software to companies like Bank of America, Barclays and Mercedes-benz to help them manage asset-financing agreements. “If that sounds dull,” says Liam Proud on Reuters Breakingviews, the company’s float last week was “anything but”. Alfa’s already richly priced shares leapt 30% as “ravenous investors” wolfed down Britain’s largest initial public offering this year, and the largest UK tech listing since 2015. By the end of the day, Alfa’s valuation had reached a “stratospheric” £1.3bn. “Part of the enthusiasm could be down to the asset finance market,” which PWC reckons will grow 40% by 2021. But a “more plausible explanation is the paucity of large listings” – particularly in the “much-hyped” financial tech business. With most well-known UK players staying private for now, starved investors “are devouring fintech’s IPO scraps” to gain exposure. Say what you like about Alfa, said Lex in the FT, but at least it “makes money” – “unlike many of its unicorn peers” (unicorns are tech companies valued at $1bn plus). Profits in both the US and Europe have jumped 30% annually over the past two years, and its core market is growing fast. Forget the cynicism: if Alfa fulfils its potential as a “useful Uk-nicorn”, shareholders will win.
Petrofac: corruption probe
“It was already old news that the Serious Fraud Office’s finest rozzers were having a poke around Petrofac,” said Alistair Osborne in The Times – the oil services giant told the market as much on 12 May. So what harm could there be in a little “update”? Plenty, as it turned out. Petrofac’s shares promptly plunged 30%, taking them to roughly half their price when the kerfuffle began. The SFO’S probe into Petrofac is linked to its wider criminal investigation into Unaoil, a Monaco-based outfit that “allegedly fixed contracts in return for kickbacks”. Petrofac “has admitted no such thing”, but you can see why the shares tanked. The company has been forced to suspend its COO, Marwan Chedid, who is a potential suspect. All contact between CEO Ayman Asfari and “external contacts” has been banned while the probe (centring on deals struck in Kazakhstan from 2002 to 2009) continues. No wonder the former FTSE 100 outfit is in turmoil, said Nils Pratley in The Guardian. “This is a deep crisis and the correct share price is anyone’s guess.”
Spotify: tuning in
The Swedish music-streaming service Spotify has been hiring bankers and an “elite cast of board members”, said Lex in the FT – big clues that it is preparing for a long-awaited listing, possibly later this year. A successful debut for Spotify, which was valued at $8.4bn at its last funding round, “will officially crown streaming as the future of the music industry”, said Edward Helmore in The Observer – even though neither Spotify nor its nearest rivals are yet making a profit. “It may not just be streaming that Spotify makes mainstream.” The company is considering the “unusual tactic” of a direct listing on the New York Stock Exchange, rather than offering investors shares before they go public, as tech companies have traditionally done. “The move saves a fortune in fees, but could also make the sale highly volatile.” Still, if Spotify pulls it off, other “hot start-ups” like Airbnb and Uber could swiftly follow in its wake.