‘Plenty of upside’: QVG makes the case for Guzman y Gomez' $2.2bn IPO despite market doubts
It’s the most watched and perhaps most polarising IPO on the ASX in years but Guzman y Gomez's investors are happy to pay a premium for a local growth story.
As scepticism swirls in sections of the markets and media over the Guzman y Gomez float, one of the burrito chain's pre-IPO investors has strongly backed the company's $2.2 billion valuation and declared that many of its critics are overlooking a key ingredient of its success.
QVG Capital portfolio manager Chris Prunty said Australian equity market investors have repeatedly demonstrated they are willing to pay a premium for growth in a market where it is is scant, citing WiseTech, Life360, Xero and Pro Medicus as examples.
That, and the company's strong returns on capital, gives the fund manager confidence that Guzman y Gomez is not overvalued, arguing it is actually priced attractively when compared to peer companies listed offshore.
“The real secret to all of this is return on capital,” Prunty told Capital Brief. “Whether for the franchisee or the corporate, the return on capital is excellent and so much superior to Domino’s or even KFC.”
