DGL Group Limited

Offering Details: DGL Group Limited (Proposed ASX Code: DGL) is involved in the business of end-to-end speciality chemicals and dangerous goods. The company operates in three interconnected industries: Manufacturing of specialised chemicals in Australia and New Zealand, Distribution & Warehousing (Logistics) of dangerous goods and speciality chemicals and Hazardous waste management. DGL has announced an IPO via the issue of new shares and the sale of existing shares held by the founder Simon Henry. The offer will raise ~$100.0 million through the issue of 100.0 million shares at an Offer Price of $1.00/share. Additional 9.8 million shares will be issued to Chem Pack Vendors at the Offer Price as part payment of the deferred consideration payable for the acquisition of Chem Pack. Joint Lead Managers fully underwrite the offer.

Current Investors: Simon Henry (Founder) is the sole owner of 100% shares of the company as of the date of Prospectus. After the offer, Simon Henry will hold ~147.2 million (57.3% stake), Chem Pack Vendors will have ~9.8 million (3.8% stake), and New Shareholders will hold ~100.0 million (38.9% stake) shares.

Shareholders’ Interest At Offer Completion (Source: Company Reports) 

Key Dates: The company lodged the Original Prospectus with ASIC on 5^th May 2021. The Offer opens on 6^th May 2021 and closes on 12^th May 2021. The company expects to start trading on ASX and NZX (on a regular settlement basis) on 24^th May 2021.

IPO Offer Dates (Source: Company Reports)

Key Statistics (Source: Company Reports)

Use of Funds: The company will use the estimated $100.0 million IPO proceeds to cover their liabilities on acquisition deferred consideration of Chem Pack by $23.6 million and repay short term financial obligations by $10 million. Moreover, funds will also be utilized for capital expenditure in building capacity and infrastructure by $10.0 million, future property equipment and strategic business acquisitions by $39.3 million. Additionally, fund utilization will also incorporate working capital expenditure of $10 million and the cost of the Offer of $7.1 million.

Sources and Use of Funds Summary (Source: Company Reports)

Performance Highlights: DGL’s pro-forma revenue grew from ~$163.5 million in FY19 to ~$180.1 million in FY20, a growth of 10.15%. Reported pro-forma revenue for H1FY21 stands at ~$92.4 million. Pro-forma NPAT grew from ~$2.2 million in FY19 to ~$4.8 million in FY20, a growth of 118.18%. Reported pro-forma NPAT for H1FY21 stands at ~$5.0 million. The above improvements are attributed to strategic acquisitions to achieve Economies of Scale and higher Operational Efficiency.

Market Drivers: DGL manufactures chemicals for the agriculture, home and garden, water treatment, construction, and mining industries. Favourable seasonal rainfall conditions boosting agriculture, coupled with the rising trend in do-it-yourself gardening and home maintenance, will be driving factors for pesticides and domestic chemicals. Additionally, significant investment in construction, infrastructure and mining may boost demand for admixtures and chemical dosage. All these, together supports favourable forecasts and reasonable potential capital expenditures requirements.

Key Risks: Considering the significant environment-related regulations in Australia, DGL must strictly comply with related legislation. Hence, any defiance may incur additional costs in terms of penalties. Lack of formal contracts with crucial suppliers may result in operational disruptions. The current COVID-19 pandemic situation may add further uncertainties.

Summary: DGL has projected an increase in total pro-forma revenue to ~$209.7 million in FY22 compared to ~$180.1 million in FY20, reflecting a 2-year CAGR of 7.9% (FY20 – FY22). Pro-forma consolidated EBITDA is forecasted to be ~$29.0 million by FY22 compared to ~$19.2 million in FY20, reflecting a 2-year CAGR of 22.9% (FY20 – FY22). As per the IPO prospectus, a significant fund utilization will be attributed to future capital expenditure for strategic acquisitions and higher operational efficiencies. 

Flynn Gold Limited

Offering Details: Flynn Gold Limited (Proposed ASX Code: FG1) is an Australian public company involved in mining exploration. The company undertakes a detailed exploration plan on the company’s tenements which are prospective for Gold, Silver, Lead/Zinc, Lithium, Tin and Tungsten. 

The company is seeking to raise $7 million to $10 million through an issue of 35 million to 50 million new shares at an Offer Price of $0.20/share. The offer is not underwriting and is subject to the level of subscription and other factors.

Equity Offer:  The offer will be accompanied by Noteholder Offer and Broker Option Offer as well. As of the date of the prospectus, the company holds 31,749,916 shares, 200 Notes (face value $10,000 each), and 1 million Performance Rights. The total Equity Offer will be subject to a discount on notes conversion and Minimum and Maximum subscription levels. Investor ownership in the Equity Offer is expected to range between 44.2% and 52.6%, with market capitalization between $15.8 million and $19.0 million, respectively.

Key Dates: The company lodged the Original Prospectus with ASIC on 30 March 2021. The offer opened on 7 April 2021 and closed on 23 April 2021. The company revised the Expected date to start trading on ASX and NZX (on a regular settlement basis) to 20 May 2021 as per ASX.

IPO Offer Dates (Source: Company Reports)

Key Statistics (Source: Company Reports)

Use of Funds: The company will dispense proceeds in 2-year tenure. The majority proceeds will be utilized for Exploration Expenditure and then General, Administration & Working capital, listing expense and remaining deferred consideration for Kingfisher acquisition.

Sources and Use of Funds Summary (Source: Company Reports)

Projects in focus: The company has seven and three 100% owned tenements in North-East Tasmania and Tasmania West, respectively, where mineralization is similar to that observed in Victoria Goldfields. They recognized similarities enable the considerable potential for significant gold discovery with occurrences of both types, orogenic and intrusive related gold deposits. Other potential and current projects include Pilbara Gold Project and Yilgarn Gold Project.

Comparison of Victoria and Tasmania gold fields (Source: Company Reports)

Location of Flynn Gold Projects (Source: Company Reports)

Performance Highlights for 7 September 2020 – 31 October 2020: The Company reported revenue of $43,565 with an Exploration and evaluation expenditure of ~$2.5 million. During the period, net Loss stood at ~$2.64 million. The company's total assets stood at ~$2.05 million, wherein ~$1.56 million is attributed to cash and cash equivalents, fully financed by Convertible notes.

Key Risks: The company is exposed to the inherent uncertainty relative to exploration activities. Strict environment norms and commodity price fluctuations may drastically affect the operations of the company. The recent COVID-19 pandemic situation may add further risk factors.

Summary: The company is exploring two emerging gold camps, namely Pilbara Western Australia and North-east Tasmania (tenement position of 1,128 km2) owned 100% by the company. Both exploration sites are rich in diverse mineral resources and operating mines. Tasmania's exploration and mining-friendly jurisdiction would enable excellent access to a skilled workforce and infrastructure. As per the IPO prospectus, a significant amount of funds will be utilized for exploration expenditure.

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