Article / 15 April 2014 at 5:42 GMT

Successful Bravofly IPO looms despite sky-high valuation

Head of Equity Strategy / Saxo Bank
• Shares priced in CHF 40-52 range
• Bravofly's revenues have outperformed peers
• Market cap of CHF 690 million expected

By Peter Garnry

eDreams, the Spanish online travel company, went public last week at EUR 10.25 per share, the shares are trading at around 10.81 today, in a further sign that Europe's tech IPO market is coming back to live. Online travel companies in the US are enjoying high valuations as these companies are completely disrupting the industry's business model. Today, the Swiss-based Bravofly Rumbo Group follows eDreams into a life as public company, but despite the recent rout in US technology stocks, is daring with a lofty valuation.

IPO details
Bravofly is issuing 2,625,000 new shares in the price range CHF 40-52 and offering 3,145,000 existing shares to the public. Using the mid-price, the company would raise CHF 121 million and get a market valuation of around CHF 690 million (based on 14,986,211 total outstanding shares after the IPO and excluding the 577,000 over-allotment option to the underwriters).

Valuation lofty on extreme growth rates
Bravofly market plus net debt indicates that the enterprise value will be around CHF 571 million. Based on 2013 revenue and EBITDA of CHF 123 million and CHF 21 million respectively this translates into an EV/Sales and EV/EBITDA of 4.6 and 27.2 respectively.

As the valuation metric below shows, these valuation ratios are definitely in the high end and especially compared to Spanish eDreams. Is this high valuation justified? Well to some extent, because the company's sales growth is considerably higher than its peers with revenue growing 70 percent and 65 percent in 2012 and 2013. The EBITDA margin at 17 percent is currently below eDreams and well below Priceline, but this matters less than the high growth rate. This IPO valuation also smells of a small-cap premium as the smaller market share just means that the potential is much higher.
Valuation metrics online travel companies

Given the strong sentiment in online travel stocks and the successful IPO of eDreams the odds are stacked in favour of a successful IPO for Bravofly despite the high valuation. This is a unique growth story in Europe and our take is that investors will buy into it, even at these valuation levels.


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