OzForex to debut on ASX

Disruptive foreign exchange services provider to list on ASX in early October

Mike King

Mike King is a Fool.com.au Investment Analyst and Writer. He caught the investing bug more than a decade ago, at a time when the U.S. had invaded Iraq and fear reigned in the markets. His initial success as the markets took off encouraged his passion and thirst for knowledge. With 13 years behind him at one of Australia's largest domestic banks, Mike's passion for stocks led him to join a boutique funds management firm, where he stayed for four years. A seven-year stint in equity research at one of the largest investment banks in the world followed that, giving Mike a thirst to pursue his passion further. Mike holds a Diploma in Applied Finance and Investment and a Graduate Certificate in Financial Planning. His passion is to help retail investors invest better, and that passion was one of his primary reasons for joining The Motley Fool Australia in late 2011. Mike has written thousands of articles since joining, including for Fairfax Media, Yahoo!7, Ninemsn and has also appeared on ABC's The Business. You can see all of Mikes' holdings here

Published September 24, 2013 12:09 pm AEST

OzForex, a provider of foreign exchange services to retail and small to medium enterprises, is expected to list on the ASX on October 11 with a market value of $480 million.

That would make OzForex the biggest purely local float on the ASX this year, if you exclude the dual listing of New Zealand's Mighty River Power (ASX: MYT), and above the listing of Virtus Health (ASX: VRT).

OzForex is seeking to raise around $440 million through the issue of 219.7 million shares at $2, with founders Matt Gilmour and Gary Lord holding onto a 4% stake each. Both will make $84.5 million from the float, having started the business more than ten years ago.

The main premise of OzForex is to provide foreign exchange (FX) services to retail and smaller customers who were getting ripped off – according to Gilmour – by the banks. As a 'disruptive' service, there's likely to be huge demand for shares in the IPO, and no surprise that the offer is priced at 21.7 times 2014 forecast earnings. While OzForex has no direct listed competitor, it has been compared to online businesses REA Group (ASX: REA) and Seek (ASX: SEK).

OzForex reports that it handled $9.1 billion in FX transactions last year, with 460,000 funds transfers and 2 million website visits each month.

Unfortunately for retail investors, up to $40 million of the float is likely to be offered to them through broker offers and not open to the general public. But the deal won't be for everyone, with the funds raised in the IPO going to existing shareholders, including Macquarie Group (ASX: MQG), The Carlyle Group and Accel Partners. Many investors are wary when the funds from an IPO are paid straight to the sellers, especially when private equity firms are involved.

Foolish takeaway

The big four banks are rumoured to be preparing competing services by early next year, but OzForex may have gained the first-mover advantage, putting it in the box seat. With plenty of growth potential, including from its offshore subsidiaries, this is a company to watch.

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Motley Fool writer/analyst Mike King owns shares in Seek.

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