Got some info... Copy and paste from a broker.. The Kelly Group will be listing on Tuesday, 3 April, in the process raising between R286m to R321m depending on the private placing book build price of 830c to 930cps. The closing date for applications to Legae Securities is Friday, 23 March at 16h30. The proceeds from the listing will be utilized to recapitalize Kelly's balance sheet, which is highly geared following its private equity buyout by Brait in 2001. At listing, the shareholding will be split 41% public, 28% BEE, 15% Brait and 16% staff & management. Kelly has a number of businesses involved in human capital solutions, staffing outsource solutions and business process outsource solutions. The bulk of its revenue (95%) is derived from flexible staffing, permanent recruitment & executive search and payroll administration & benefit services. Fundamentals for its businesses are strong: trading conditions in the local staffing provision industry are positive, driven by strong economic growth, capacity building in the private sector and government's infrastructure drive. The trend for companies to outsource their staffing requirements has gained momentum and the growth in the economy is increasing demand for semi-skilled and skilled labour; the current skills shortage is creating opportunities for the staffing industry; government is increasingly looking at providing initiatives to develop the business process outsourcing (BPO) and off-shoring industry (read call centres); and high levels of industry fragmentation present acquisition opportunities. As a business, Kelly is very similar to Adcorp Holdings. Indeed, the two are fierce competitors in their flexible staffing and permanent recruitment divisions. It also appears they have very similar strategies with respect to developing their BPO product offerings (Kelly recently instituted a R40m legal claim against Adcorp over Adcorp's FMS acquisition). Despite having a lower listing market capitalization than Adcorp, Kelly is listing on a substantially higher pro-forma (historic) PE and lower pro-forma (historic) dividend yield. In this context, Kelly's offering share prices are difficult to justify, as over the medium to long term, we do not believe that Kelly can grow at a significantly higher rate than Adcorp. The two groups have similar EBIT margins and returns on capital. Kelly does not provide a listing forecast for its financial year end Sep-07. The group recently issued an operating update, stating that for the 5 month period to Feb-07, revenue and EBITDA were up 27% and 54% respectively. In our view, the operating update does not provide a satisfactory indication of what the full year bottom line growth rate may be, although the group will be paying little tax owing to a large assessed loss. In addition, the operating update does not distinguish between organic and acquisitive growth in the period. On current historic valuations, our preferred entry into the Staffing & Recruitment sector is Adcorp.
