Airlink - Pakistan's biggest private-sector IPO
With another IPO around the corner, InvestKaar unpacks the prospectus, business model, and financials, so it becomes easy for you to decide.
Transaction details:
Airlink is looking to raise 3.9bn by offering 60mn shares to the public. At a base price of Rs65/sh, IPO size will be Rs5.8bn, and at the cap price of Rs91/sh, the amount will rise to Rs8.1bn
The proceeds will be utilized to finance working capital needs
* Industry: Rs258bn industry and growing fast
The market is divided into the following:
Premium (priced at Rs80k+), high-end (priced between Rs48k-80k), mid-end (between Rs16k-48k), and low-end (Rs16k and less).
Mid-end generates the most sales (73%) followed by low-end at 17%
About Airlink:
- Airlink is a mobile phone distributor and has expanded into retail with 14 stores - market share btw 17-21%
- It has distribution agreements with Samsung, TCL, Huawei Tecno, Itel and is a sub-distributor for Apple products.
- It is growing fast, CAGR of 36% for revenues and 49% for mobile phones sold in the last 5 years.
- It has established its own assembling plant to assemble 400k units per month. Currently, they are assembling 150k units per month
Business Model - Follow the cash
Distribution is a working capital cycle business. The higher a company rolls its cash, the better its earnings would be. Cash conversion cycle for mobile distributor:
Airlink Working Capital Cycle:
Growth Opportunities:
- Switching from feature to smartphones. Only 18% of the Pakistani population owns a smartphone
- Increasing adoption of 3G and 4G (100mn users now vs 29mn in FY16) due to more use cases
- Local assembly may bring down phone prices
Risks:
- The economic slowdown may lead to a slower cash conversion cycle
- Growth in market share of brands that Airlink doesn’t distribute (OPPO, VIVO, and Infinix)
- Threat of new entrants
Want to know more? Read up our detailed yet simple company analysis at investkaar.com/airlink-pakist…
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Happy Investing
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