McGrath Estate Agents is one step closer to listing on the ASX, although time appears to have run out for a 2015 float.
A spokesperson revealed that McGrath has hired brokers to conduct research analysis, which is generally something that occurs before a float takes place.
“Still no formal decision is underway on the IPO. However, research analysis by associated brokers is,” the spokesperson told REB.
ASX general manager of listings Max Cunningham said it generally takes about 20 weeks for a company to prepare for an IPO, which would suggest a trading debut no earlier than 2016.
Mr Cunningham told REB that a company first appoints an adviser and then spends about 10 weeks preparing the prospectus and due diligence.
The next steps are to market the float to institutional investors, lodge the prospectus with ASIC, lodge the listing application with the ASX, conduct final marketing and then allocate shares.
“The reason you go public is either you need capital to fund the growth of your business, or you want to get currency for future acquisitions, or you're a vendor looking to exit,” he said.
“A challenge for a company that's listing is they get obviously a lot more scrutiny. They get scrutiny from regulators, they get scrutiny from investors and, perhaps most challenging, they have greater scrutiny from their competitors.”
Mr Cunningham said companies that list on the ASX also face greater compliance obligations, although this can have the benefit of forcing them to be more disciplined.
Dale Gillham, chief analyst at share market advisory firm Wealth Within, said McGrath Estate Agents would hope that any float would coincide with a positive market.
“What you're wanting to do with a listing is actually not only put the shares out but, when you're taking on shareholders, you actually want them to make money pretty quickly so they're happy with the listing; not the other way around,” he said.
Mr Gillham told REB that one key detail to consider would be the company’s debt level.
“Anything over about 30 or 40 per cent debt just gets too high. You want to have a very low level of debt from the company, simply because you want to have free cash flows,” he said.
“You want to have good profits. You want to have good earnings growth over the previous three to five years. You don't want to see declining earnings growth.”
McGrath Estate Agents posted record residential volumes of $12.3 billion in 2014-15, which was 21.8 per cent higher than 2013-14 and 75.7 per cent higher than 2012-13.
[Related: McGrath looking ‘very closely’ at IPO]