Guzman Y Gomez's upcoming initial public offering (IPO) is causing consternation among fund managers and equity capital markets teams due to valuation expectations, according to the AFR.
Sources indicate that the Mexican food chain has been in talks with top-tier investment banks to appoint advisers for the IPO.
However, the company's valuation appears to significantly exceed that of similar businesses, including Domino's Pizza Enterprises and Collins Foods in Australia, as well as NYSE-listed Yum Brands and Chipotle internationally.
Urged to reassess expectations
Bankers have advised Guzman Y Gomez (GYG) to consider an IPO valuation at 17- to 18-times price-to-earnings ratio, nearly half of what Barrenjoey Capital Partners invested in the business 1.5 years ago.
Co-founder Steven Marks and his backers at TDM Growth Partners, Barrenjoey, Point King Capital and Aware Super have been urged to reassess their expectations.
This valuation gap presents a considerable obstacle for shareholders, particularly as the last set of fundraising documents seen in September 2022 assessed the company at A$1.6 billion.
It represents a 2.02-times projected revenue for the 2023 financial year, though Aware Super secured a buy-in at a more modest A$1.35 billion.
The key question remains whether GYG will proceed with the IPO or delay its plans.