London's first listing of the new decade should fare better than those that brought the old one to a sorry end. Smart-meter supplier Calisen said on Thursday it would look to sell 300 million pounds of new shares, plus an unspecified volume of private equity owner KKR's stake. The sector's encouraging prospects, and the company's position within it, suggests Calisen is right to raise its head above the parapet.
Last year was a bit of a mare for UK listings. The volume of initial public offerings represented the lowest level since 2009, Refinitiv data showed. The likes of Kazakh finance firm Kaspi.kz and the African Export Import Bank, a development lender, pulled intended listings.
Still, tech-cum-booking company Trainline is over 10% above its June listing price. The UK's December general election has banished fears of a hard-left government and clarified some of Britain's Brexit fog. Calisen hopes to join the FTSE 250 Index which, after spending most of 2019 below its 10-year average valuation of 13.7 times expected earnings, is now trading at over 15 times.
Calisen looks more like Trainline than Kaspi. Along with Australian group Macquarie, it's one of two leading players supplying UK homes with meters that allow customers to optimise when and how they use energy - hopefully reducing bills and carbon emissions. Under one-third of the 51 million meters envisaged by the UK government have been installed. Calisen has done one-third of them, and has orders to do another 6 million.
Assuming it grew revenue by 10% in 2019, less than the average rate of the previous few years, and sports the same margin as last year, underlying EBITDA would be 164 million pounds. On the same 11.7 times forward multiple as smaller listed peer Smart Metering Systems, and stripping out 500 million pounds of net debt, its equity would be worth 1.4 billion pounds.
Calisen's business model is contingent on the UK government not cooling on green issues. And if its story was that compelling, KKR might not be cashing in a chunk now. Still, once its current growth phase ends there's scope to further integrate smart meters with domestic electric vehicles, battery charging and home power generation. Unless it tries for a far richer valuation, that should prevent London's first listing of the 2020s being a dud.
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