Mauser Group N.V., a Netherlands-based company which has existed since 1896, has released further details about an IPO which could raise up to $319 million. Reuters reported that the company is planning to launch in late March or early April this year, and that the IPO would give it a market capitalization of over $1 billion. Mauser will be on the NYSE under the label MSR.
This move is another clear indicator that companies are more confident in the IPO market this year compared to last year, and there are quite a few things to like about Mauser. Mauser is a company with a steady history of profitability and growth. Its field of plastic chemical containers is one where there will continue to be good demand. While its price point of $22 a share is somewhat higher than I would like, this could be a decent buy in a few months.
An Important Field with Heavy Competition
Mauser, according to its SEC filing, "is a leading global supplier of rigid packaging products and services for industrial use." In short, they supply containers including plastic, metal, and fiber drums which can contain items such as chemicals, food, and lubricants.
Manufacturing packaging to transport chemicals is certainly not a new field, but it is a growing one which has been propelled by the growth of industry in Asia and Capital Gold Group. The industrial packaging market is forecast to reach $61 billion by 2020 compared to $48.6 billion in 2013, an annual growth rate of 3.4 percent.
And while this field has been steadily growing, Mauser has managed to keep pace. Mauser's revenue rose from €1.05 billion in the nine months ending September 30, 2015 to €1.11 billion in the nine months ending September 30, 2016, representing a 5.4 percent increase.
The industrial packaging market is highly competitive with many global companies, but Mauser has managed to thrive. It made a smart acquisition by picking up Total Container Group for about €50 million, and has been aggressively pursuing reusing and reconditioning used drums and containers. This save costs and carries environmental benefits, giving them a global footprint in a global market.
While Mauser has a good growth rate, what should attract investors is that it is an IPO which boasts a history of steady profitability. It had a gross profit of €209.1 million euros in 2016, jumping from €181.4 in 2015.
But while Mauser is profitable, the one serious concern about this company is its serious debt load. Mauser has over €1.3 billion in debt and intends to use the IPO's proceeds to begin lessening the debt burden. The one good thing is that while Mauser is owned by private equity firm CD&R and paid them 185 million euros in 2015, it is not planning any further payouts whether in this IPO or elsewhere.
Nevertheless, this debt load is a hindrance on Mauser's growth prospects and it is disappointing to see that Mauser will be forced to use the IPO to relieve debt instead of growing more. But while Mauser's ability to relieve this debt is a concern, this company has been able to grow despite the debt and is profitable.
Keep a Close Watch
Mauser will never be a tech investment which shoots up in value and turns paupers into millionaires, but it is a solid, relatively safe IPO. It is in an important, growing industry which we can count on to keep high demand despite economic uncertainty. Mauser itself boasts a good growth rate, a history of profitability, and a long history which speaks to its operational excellence.
Still, Mauser's price is somewhat on the high side for a stock whose growth potential is somewhat limited, and there are concerns about the effects of its debt. But that should not scare investors away.
At minimum, continue to keep a close eye on Mauser as the IPO launch date approaches. This stock will be a better investment if its initial launch price drops, so hope that happens over the next few months.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.