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Playing the IPO Market: What Chances Does This Niche Retailer Have?

By  +Follow June 10, 2013 9:43AM
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Gaskins

In this week's interview with Francis Gaskins, Equities.com discussesthe fall and current state of the Chinese IPO market, companies going public this week, and one niche retailer that is planning to do so in the near future. Gaskins has been recognized by major financial media outlets such as Forbes, CNBC, Bloomberg, and many othersas one of the best resources for the IPO industry available today. Gaskins is a highly sought-after expert for his insights and opinions as an IPO analyst. Readers can see his previous weekly interviews with Equities.com here.

EQ: This week, LightintheBox (LITB) debuted on the Nasdaq on Thursday. Shares jumped considerably from the offering price of $9.50 per. What were your thoughts on this IPO?
Gaskins: If LITB has a good June quarter after its first profitable quarter, which was March ’13, then the stock should do well.  It’s trading like it wants to go higher, which suggests the June quarter may show a profit.  And by now the IPO flippers are all out of their stock.

EQ: LITB was also the first Chinese IPO this year, which underlines just how much that market has dried up the last two years. But the last three or four Chinese IPOs have fared well. Does this help to remove the stigma that hurt this market over the past several years?

Gaskins: The stigma is because all Chinese IPOs have to IPO using a shell type structure, typically in the Cayman Islands, while the actual operating companies are ‘protected’ back in China.  Also, there have been numerous accounting issues with Chinase IPOs.

A lot of the stigma came because smaller investment banker firms brought questionable Chinese companies public, without regard to quality.

Now, it’s very important to look at the lead underwriters, because they are putting their reputation on the line by underwriting Chinese IPOs.   I think the market is gaining confidence in the bigger underwriting firms that are doing the Chinese IPOs.  At this stage, we’d shy away from any Chinese IPO underwritten by a non-major investment banking firm.

EQ: There are three IPOs scheduled for next week with Coty (COTY), Gigamon (GIMO), and Aratana Therapeutics (PETX). What are you expecting here?
Gaskins: COTY is a smaller competitor to L'oreal S.A (OR), Estee Lauder (EL) and Avon Products (AVON).  COTY’s financial record shows spotty profitabilty trends.  They do intend to IPO at  a P/E discount to segment competitors.  COTY has a negative price-to-tangible book value, which suggests it’s been stripped of cash by its leverage buy-out owners.
100% of the proceeds are going to selling shareholders, which isn’t a positive.   We expect COTY to be OK, not great, in the IPO aftermarket.

Gigamon, on the other hand, is our IPO pick of the week because of increases in top line revenue.  GIMO has identified a specialized niche in switch traffic management & reporting, and appears for the time being to have a niche jump on its larger competitors, which include Cisco Systems (CSCO), Juniper Networks (JNPR) and Brocade Systems (BRCD).
GIMO was profitable in 2010, 2011 and 2012.

For Aratana Therapeutics, since its founding in 2010, it has licensed three compounds, and is  developing into six products for use in pets in the United States and Europe.
Potential competitors include large animal health companies, such as Merck Animal Health, the animal health division of Merck & Co., Inc.; Merial, the animal health division of Sanofi S.A.; Elanco, the animal health division of Eli Lilly and Company; Bayer Animal Health, the animal health division of Bayer AG; Novartis Animal Health, the animal health division of Novartis AG; Boehringer Ingelheim Animal Health, the animal health division of Boehringer Ingelheim GmbH; and Zoetis, Inc.

Aratana is currently conducing clinical studies, and then plans to conduct clinical trials, so it appears that revenue generation is a long way off.  We believe PETX will price below its initial range.

EQ: There are also reports that retailer The Container Store is planning to do an IPO soon. Does this niche company have much potential to grow?

Gaskins: The Container Store is a specialy reatailer that created the storage and organization retail category in 1978.  They have 64 stores now, and several years ago had 49 stores, so the annual store opening growth rate isn’t very high.

They have only 10 stores in California and 13 in Texas, where they are headquartered.  They are in 22 states plus D.C., so it looks like they’ve cherry picked their locations (makes sense).  
Their stores are about 25,000 square feet, which is a little more than half an acre.    If they are going to grow meaningfully, then they may have to downside their store size to get to smaller communities.   And once their S-1 is filed it will be interesting to see what percentage of revenue is generated from online activity.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions.


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Results for LITB
Alì Tarrab
19 Sep 14 08:30:47
RT @VisualStockR: $LITB - LightInTheBox Holding Co., Ltd. Stock Added to NASDAQ Golden Dragon China Index http://t.co/NndcHBR41S
Stock Moo
19 Sep 14 05:41:56
$litb: LightInTheBox Holding Co., Ltd. Stock Added to NASDAQ Golden Dragon China Index http://t.co/aDc1diks9m
NASDAQ
19 Sep 14 05:06:54
$LITB - LightInTheBox Holding Co., Ltd. Stock Added to NASDAQ Golden Dragon China Index http://t.co/diiBZ8VEob
VisualStock Resource
19 Sep 14 05:06:48
$LITB - LightInTheBox Holding Co., Ltd. Stock Added to NASDAQ Golden Dragon China Index http://t.co/NndcHBR41S
4-traders.com
19 Sep 14 05:05:07
LightInTheBox : Stock Added to NASDAQ Golden Dragon China Index http://t.co/L3Pb3GrBn9 $LITB
RC
18 Sep 14 23:07:11
Tickers For Friday | Momentum Trading with RaginCajun http://t.co/HqfvpeBIlQ $CERS, $CBAK, $CLVS, $LITB, $JMEO, $TUBE, $UTIW, $BWLD
Scott
18 Sep 14 14:04:19
RT @VexTrades: 9/19 Watchlist: $BEAT, $DHX, $DRL, $BUSE, $LTS, $LITB, $OPTT, $TRX, $TRXC. http://t.co/jnV4zC7ld8
stt2318
18 Sep 14 14:03:37
RT @VexTrades: 9/19 Watchlist: $BEAT, $DHX, $DRL, $BUSE, $LTS, $LITB, $OPTT, $TRX, $TRXC. http://t.co/jnV4zC7ld8
Brandon Hayward
18 Sep 14 13:59:23
9/19 Watchlist: $BEAT, $DHX, $DRL, $BUSE, $LTS, $LITB, $OPTT, $TRX, $TRXC. http://t.co/jnV4zC7ld8
tom of the sea
18 Sep 14 11:36:39
more volume please $LITB!
tom of the sea
18 Sep 14 09:26:40
joined @The_Real_Fly in $LITB 6.25 with some volume here's right about headed up
Charts 123
18 Sep 14 03:52:02
Sell Signal: $ADXS $BTH $CGA $ENT $EVRY $IMPV $INO $ISNS $LITB $MEIP $MKTO http://t.co/heP0EJaO1i #stocks
Frank Zorrilla
17 Sep 14 06:05:57
$GOGO $HIMX $IMPV $LITB swing long ideas if and only they go thru yesterday's high http://t.co/8NiCyQBgph
Charlie
16 Sep 14 12:35:30
$LITB in $6.08vs $BABA ? sense of two Dalai Lama lol
Stock_Tracker
16 Sep 14 10:45:02
$LITB Headlines What to expect in markets for the next 24 hours 6:13 p.m. Aug. 19, 2013 - http://t.co/JWocoY6fHV http://t.co/ddDgZ68DMW
Investors Hangout
16 Sep 14 07:43:16
jim50: $LITB High Date=Sept-16-2014 Open=6.22 High=6.28 http://t.co/TahxXvIoYy
Investors Hangout
16 Sep 14 07:43:16
jim50: $LITB High Date=Sept-16-2014 Open=6.22 High=6.28 http://t.co/N87rBZpSEA
jim50
16 Sep 14 07:29:44
$LITB High Date=Sept-16-2014 Open=6.22 High=6.28 Low=6.22 Close=6.28 Volume=7952 http://t.co/tjtFR5Tq1t
Investors Hangout
16 Sep 14 07:13:06
DennyT: BBRY Morningstar $BBRY $LITB $VIPS $SVXY $IBB Buy http://t.co/m2UQglSzpX
Investors Hangout
16 Sep 14 07:12:36
DennyT: BBRY Morningstar $BBRY $LITB $VIPS $SVXY $IBB Buy http://t.co/F3fFzX0dzd
DennyT
16 Sep 14 06:50:14
BBRY Morningstar $BBRY $LITB $VIPS $SVXY $IBB Buy or Sell?,Parabolic SAR,Open,Headlines,On Radar Stock Quote h http://t.co/UWijQAtd6u
China Stock Research
15 Sep 14 06:40:00
E-commerce insiders seek to break barriers in #China on internet and online shopping for Chinese consumers http://t.co/GBchBpmUHZ $LITB
Investors Observer
15 Sep 14 06:36:27
PriceWatch Alerts for $ACHN, $LITB, $VJET, $WFM & $DIS from InvestorsObserver today: http://t.co/lPzrfr5PqM #OptionsTrading #CoveredCalls
Julian Close
15 Sep 14 06:36:27
PriceWatch Alerts for $ACHN, $LITB, $VJET, $WFM & $DIS from InvestorsObserver today: http://t.co/0HQ6xB8JgF #OptionsTrading #CoveredCalls
Van Dinh
15 Sep 14 00:00:26
RT @TraderQuebec1: Watchlist for tomorrow: $RWLK, $NETE, $EVRY, $FRSH, $LOCO, $PRKR, $TUBE, $IVAN, $NFEC, $LITB, $ENSV, $LLNW, $PULS, $RIC,…
Eli Pritsker
14 Sep 14 20:20:15
RT @TraderQuebec1: Watchlist for tomorrow: $RWLK, $NETE, $EVRY, $FRSH, $LOCO, $PRKR, $TUBE, $IVAN, $NFEC, $LITB, $ENSV, $LLNW, $PULS, $RIC,…
				
				
By  +Follow June 10, 2013 9:43AM
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