Australia’s largest foreign exchange broker Pepperstone Financial will be closely following the October debut of competitor OzForex on the Australian market.
If investors receive it well Pepperstone could become the next FX broker to list, chief executive Owen Kerr told Business Insider. “We are waiting on the sideines.”
While investment banks are eager to take the company through a float, Kerr said he and fellow co-founder Joe Davenport already have an informal agreement with a “New York-based” outfit, which he declined to identify as the information is private.
“We do get calls all the time from various firms,” said Kerr. “We never shut the door on people. We like to hear them out.”
Peppestone is the largest currency exchange in Australia and in the top-ten globally. It handles approximatly $US71 billion worth of trades each month, for around 25,000 clients.
“We are like the e-trade of currency,” Kerr said, a reference to the US-based discount stock brokerage. “We have managed to achieve market share from existing firms quite quickly. We have gained a lot of notoriety in the industry.”
There are an increasing number of deals in the sector. Australia’s OzForex, which is backed by The Carlyle Group, Accel Partners and Macquarie Group, is set for an $480 million 11 October IPO on the Australian market, with shares priced at $2.
MoneyGram International, a cash transfer firm, also said in June it was for sale.
Kerr said, if revenue continues as forcast, Pepperstone expects to double earnings in the 2014 financial year to around $60 million.
This week the Wall Street Journal valued the business, which rarely discloses financials, at around $900 million, based on a multiple of 15 times earnings.
While “this could be a little on the high side,” Kerr said the estimate was close.
How the Australian market reacts to OzForex’s multiple of 21.7 times forecast 2014 profit, and the appetite for a new technology-focused business will help decide the timing and location of Pepperstone’s own listing, Kerr said.
Exchanges in the United States or the United Kingdom are other options. Australia could potentially “not be good for tech-investment knowledge,” Kerr explained.
In June insurance comparison site iSelect listed in Australia, with poor results. Kerr said Pepperstone took that into account, as both companies have technology as their primary offering.
“We looked at iSelect as a bit of a failure,” said Kerr. “There are some parallels.”
iSelect shares dived 15% on the June 24 debut and have since not traded above their issue price of $1.85, after the company — which was backed by Credit Suisse and Baillieu Holst — was heavily promoted to investors.
While an IPO is a logical outcome, Kerr confirmed comments made to the Wall Street Journal earlier this week, saying there was no rush to take the company which he helped establish in 2010 public.