Co-working hub operator Victory surges in strong debut
Nick Lenaghan and Su-Lin Tan
Co-working hub operator Victory Offices, chaired by former Victorian premier Steve Bracks, has surged on its ASX debut, gaining 15¢, or 7.5 per cent, to close at $2.15.
The float is now worth almost $88 million after its initial public offer last month raised $30 million in a bookbuild priced at 8.8 times on a price-to-earnings basis.
"The completion of the capital raising and the ASX listing has ensured that Victory Offices is well-positioned to capitalise on the opportunities that currently exist in securing floors in high-quality locations," said managing director Dan Baxter.
"I am pleased with the current occupancy levels, providing further confidence to commence the roll-out of the eight new locations in the 2020 financial year."
Victory's Barangaroo hub reception. Victory Offices
The Victory float comes as investment increases in the rapidly growing flexible working market, an alternative to traditional office space.
It is also the first foray into the listed market by Mr Bracks, who joined Victory as its non-executive chairman in 2017 and chairs industry super fund giant Cbus.
Victory's forecast revenue for the full year of 2019 is expected to hit $45 million, up from $29 million the year before. Its 2019 full-year net profit is expected to double to almost $10 million, from $5 million in 2018.
Led by Mr Baxter, Victory began operations in 2013 and has secured 21 sites across Melbourne, Sydney and Brisbane.
It is due to open its 20th hub office on St Kilda Road in August, having taken over the leasehold of an entire building. The site will be its largest, covering 3000 square metres over three levels.
The next opening after that will be a 2500-square-metre floor in Dexus' new development at 100 Mount Street in North Sydney.
Victory's occupancy had risen to 89 per cent by June 11, the company said, compared with the 78 per cent at March 20 flagged in its prospectus.
But the operator is not without rivals in the rapidly growing co-working sector. Its prospectus called out the risk it faces from "competition from well-established organisations including but not limited to Servcorp, Regus and WeWork".
"The industry is also subject to new entrants from overseas markets. Increased competition may reduce the volume and price of the services that the company provides, which may have a material and adverse effect on revenue and profitability and, in particular, its growth," the prospectus said.
Homegrown rivals are rapidly rolling out their own co-working hubs. Rivals include WOTSO, which is run by listed property funds manager BlackWall, and Hub Australia, which has won backing from the Smorgon family's Sandbar Investments and investment house Wingate.
Regional players are also moving into the local market, such as Singapore's JustCo which has hubs in Melbourne and Sydney.
Steve Bracks
Nick Lenaghan is The Australian Financial Review's property editor. He is based in Melbourne. Connect with Nick on Twitter. Email Nick at nlenaghan@afr.com
Su-Lin Tan reports on housing, commercial real estate and property finance. She also covers China and Asian business, trade and politics. Connect with Su-Lin on Twitter. Email Su-Lin at stan@afr.com.au
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