IPO market set to heat up in March

Upcoming floats for February

The IPO market is still running hot, with a handful of initial public offering (IPO) hopefuls hitting the boards this month – and some recording stellar price increases. Following-on from the strong IPO momentum from late last year, 2021 is shaping-up to be another cracking year, assuming volatility remains muted. From 1 December 2020 through to 20 January 2021, a total of 33 new companies listed on the ASX. Of those, 25  stocks posted a share price gain. Some of the most successful listings so far this year have been:

• Pentanet (ASX:5GG) – Listed at 25c on 29 January. Shares up 152% at 63c
• BikeExchange (ASX:BEX) – Listed at 26c on 9 February. Shares trading at listing price
• OzAurum Resources (ASX:OZM) – Listed at 25c on 8 February. Shares trading at 23c
• Mamba (ASX:M24) – Listed at 20c on 5 February. Shares trading at 27c.
• TruScreen (ASX:TRU) and Chimeric Therapeutics (ASX:CHM) which are up 77 per cent and 55 per cent respectively.

Airtasker IPO

The IPO that’s been dubbed the one to watch in 2021 is Airtasker (ASX: ART). The Sydney-based online marketplace, which enables users to outsource everyday tasks, will list on the ASX after a share offer that seeks to raise $83.7 million at 65 cents a share. The first $15 million will be used by the company, while a large chunk ($50 million) of the remainder will go toward the selling shareholders, Seven West Media. According to the AFR, “Airtasker told fund managers it expected $143.7 million in transactions to take place on its platform in the 2021 financial year, which would represent 27 per cent growth.” Not a bad time for a float.

What does Airtasker do?

Airtasker is Australia’s leading online marketplace for people who need work done to connect with businesses, or other people, who want work. The platform transacts services such as handyman jobs, domestic cleaning and business administration, through to more complex work including architectural design, tax consultancy and legal advice, and many service industries in between.

The addressable service task market in Australia was worth a whopping $52 billion in 2019, which grew at a compound annual growth rate of 5.2% between 2010 and 2016. It has become a highly competitive space, crowded with the likes of TaskRabbit, hipages, Service Seeking, Rated People, Pro Referral, Thumbtack and Oneflare.

The listing is being conducted to:

• fund the further development of Airtasker’s marketplace platform
• fund international expansion and working capital requirements;
• enhance the company’s profile through being a publicly listed
• provide a liquid market for buyers and sellers
• provide working capital

Airtasker generates revenue by charging its customers a service fee, and its “taskers” a booking fee. Both are a percentage of the “task value” agreed between the customer and the tasker. Airtasker has more than 4.3 million registered users to date: more than 950,000 customers and more than 150,000 taskers transact through its marketplace. No customer or tasker is considered “key.”

Did COVID-19 impact Airtasker?

In one word, yes; negatively. Airtasker recorded a drop in marketplace activity due to the effect of the pandemic on consumer sentiment and restrictions on people movement. When Stage 3 and 4 restrictions were in place, marketplace activity froze. Following the lifting of government restrictions, Airtasker recorded a strong recovery in marketplace activity as people and taskers were free to travel.

Positive outlook

• Airtasker is quite a unique platform when compared to its rivals. It has an open and almost infinitely horizontal marketplace structure. This means that customers can describe any problem they need fixed and a tasker will likely be able to solve it.
• Airtasker does not charge any upfront fees or advertising fees to access the marketplace. It earns fees on successful outcomes.
• What is brilliant about Airtasker is the charging system. Taskers’ earnings are released to them once the customer confirms completion of the task. This ensures all parties are happy with a successful outcome.
• Airtasker is forecasting strong growth in the following measures:
  • Airtasker’s gross merchandise value (GMV) is growing at a 2-year CAGR of 24.2% between FY19 and FY21F;
  • Airtasker’s revenue growing at a two-year compound annual growth rate (CAGR) of 32.1% between FY19 and FY21F;
  • Airtasker’s gross profit is growing at a two-year CAGR of 33.8% between FY19 and FY21F;
  • Airtasker also has a track record of strong and sustainable gross margins: this figure was 93% in FY20
  • Airtasker is targeting a $236 million to $257 million enterprise value, or 10.49 times forecast FY2021 revenue, and up to 11.27 times gross profit.

Airtasker appears to offer a unique point of difference that helps it stand out from its competitors. It has carved out its own part of the market that is open-ended, and has access to an almost infinite range of services at a time and price that it chooses. In similar fashion, taskers using Airtasker have access to a massive pool of flexible workers in which the price, scope and timing of work is self‑determined.

The major downside is that Airtasker is an eight-year-old company, but is not profitable. The prospectus says it “may take time to achieve, or may never achieve, profitability. Even if Airtasker does achieve profitability, it may not be able to sustain or increase profitability over time.” The company expects an after-tax loss of $6.2 million this financial year (a $1.1 million increase from last year), and a big improvement from the 2019 financial year loss of $27.2 million.

Of course, we all know the market is forward-looking and some tech stocks, i.e., Tesla and Uber continue to be loss-making, yet their share prices have gone up. This happens when shareholders believe the company has a bright future despite the losses. The questions is, will Airtasker be profitable sometime soon? Or does it even need to be?

On the other hand, Hipages (ASX:HPG) listed back in November 2020 at $2.45 a share and has since tracked sideways and is hovering at $2.25. It could be a case of the right pricing. If priced right, Airtasker could be a winner. If not, it could a long-term play. Either way, Airtasker will be the first big-ticket ASX float of early 2021, and could set the scene for the remainder of the year.

Ishan Dan

Ishan is an experienced journalist covering The Inside Investor and The Insider Adviser publications.