KEY POINTS:
Taupo Motorsport Park's initial public offering is impressive but small, says Hastings sharebroker Matt Carney.
Taupo is undertaking an initial public offering to pay off debt, buy land under its business park and fund further development.
The company, which hosts the New Zealand leg of the A1 GP racing series, is planning to float just over 30 per cent of the company, offering up to 2.75 million shares at $1.10 each.
The total raised would be up to $3 million, minus listing costs of $330,000.
Repayment of an overdraft facility and covering the final costs of a track upgrade and the pit-lane facility would consume $1.2 million of the raised capital.
Matt Carney, of Hastings sharebroker Esam Cushing & Co, said he would probably only suggest the offer to those with an interest in motor sport or the car industry.
"One would expect that there wouldn't be a huge amount of liquidity in the stock once it lists - that would be my biggest concern," Carney said.
"It's certainly not one that you'd buy thinking, 'Oh, I can sell it in the first week and make a quick profit'."
The float was priced realistically and it would be surprising if the company failed to raise the money it wanted, Carney said.
Chairman John Parker, who is also chairman of Port of Tauranga, said the amount being sought was probably indicative of his conservatism.
"I have a very strong view about companies that take in money just because it's available," Parker said. "That's the amount of money we believe we can make a very sensible return on."
The company planned to use $700,000 to buy 4ha of freehold land under its business park next to the track.
The two-building business park had 22 units, with more than three-quarters of the available space leased, and with initial plans for a third building completed.
Parker had been a little concerned that people would see the listing only as a float for petrol heads.
"That's why I go to some pains to point out that it's got a board of people who are not car racing nutters at all," he said.
The company had provided more information than was required for joining the NZAX, he added.
In the 10 months ending March 31 the company posted revenue of $2.3 million - including a $1.3 million gain on investment property value - and $523,661 of net profit.
Forecasts for 2008 and 2009 show revenue of $2.3 million rising to $3.1 million and net profit of $201,468 increasing to $752,717.
There was no investment property value gain forecast for the coming two years, during which time operational revenue was expected to increase.
By 2009 revenue from the business park and pit lane building was expected to generate nearly one-third of total revenue.
The company's core business included driver training, car product launches, race team testing, tyre testing and cycle events.
The 3.5km FIA grade two status track - one down from Formula 1 standard - had four configurations with the ability to run two separate tracks at the same time.
"There are days when we're renting it to too few people for too little money and we can raise that a lot," Parker said.
A further $300,000 of capital was earmarked to build a driver training skid pan, $300,000 for tar-sealing the hard-stand and undertaking some minor track modifications, and $200,000 to fit out corporate suites.
"Further down the track I want to see this become a destination for people to have fun as well as serious racing," Parker said.
Future plans not included in the float could include a 4x4 track and a cafeteria.
An international standard drag strip was operationally contracted to a separate company but had been underperforming. "It can do a hell of a lot better ... they are way under what our first year expectations were."
The company had waited too long to appoint a full-time chief executive, but in Kevin Prendergast, Parker believed they had the right boss.
Prendergast has recently spent four years as general manager of Perth Motorplex, with previous roles including circuit manager at the Phillip Island Grand Prix Circuit and motorsport manager for Eastern Creek Raceway in New South Wales.
"It is a reasonably new venture and it's got a range of products that I felt that I could assist to develop," Prendergast said.
"Basically now that all of the facilities are finished we need to establish our daily activities to expand and use the facilities that we have.
"With this corporate area, this venue is ideally suited for functions that can combine the drudge of sitting in a seminar ... at lunchtime you take a break, you have your meal, you go on the race track and you do some experiences."
Taupo Motorsport initial offer
* Raising up to $3 million.
* Offer 2.75 million shares at $1.10 each.
* Market capitalisation of $9.9 million.
* Money earmarked to pay off debt and buy freehold land.
