What's a chicken business really worth?
It's up to about 16.8-times forecast profit, if you listen to the brokers paid to say nice things about Inghams Group Ltd.
That's 16.8-times forecast profit of $98.8 million, which is the best part of $1.7 billion.
Reports from Inghams Group Ltd's brokers flooded on to investment fund managers' desks this week, as the analyst marketing period kicked off the company's run at the Australian Securities Exchange (ASX) boards.
Analysts will be in front of fund managers for the next fortnight, before Inghams lodges its prospectus with the securities regulator.
The company is set to raises the funds it needs for a public listing by mid-November.
Inghams sponsor brokers estimate the company is worth about 13-times to 16.5-times forecast profit, which equates to about $1.3 billion to $1.6 billion on a market capitalisation basis.
Analysts from the six brokers on board - Macquarie, UBS, Credit Suisse, Morgan Stanley, Citi and Goldman Sachs - all took their turns in valuing the company.
Each came upwith similar ranges.
Credit Suisse analyst, Paul Buys, was the highest with a $1.35b to $1.66b equity value, which represented 13.6-times to 16.8-times forecast profit.
In his report titled Accelerated growth, Buys told clients Inghams' was targeting up to $200 million in efficiency improvements, including automation, labour productivity, procurement, network rationalisation and logistics.
That is expected to bear benefits worth $160 million to $200 million over five years under the company's 'Project Accelerate' program.
Analysts turned to ASX-listed Tegel Group and berries company Costa Group is valuing the business, along with the small industrials index and other domestic names including GrainCorp and Tassal Group.
Fund managers are focused on the risks, as usual.
They plan to quiz Inghams boss Mick McMahon about oversupply of chickens in the Australian and New Zealand market, and feed, which is the second-biggest part of Inghams' business.
- This article originally appeared in the Australian Financial Review