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ERoad to raise $49.5m in pursuit of US growth

ERoad, whose products allow transport companies to manage and pay road user charges and keep track of their fleet, is looking to raise up to $49.5 million in an initial public offer next month as it chases growth in the US market.

The Auckland-based company will sell between 13 million and 15.7 million shares at an indicative price range of $3 to $3.80 per share, of which $40 million will be new capital, with existing shareholders selling between 2.4 million and 2.5 million shares and keeping about three-quarters of the business, according to its prospectus lodged with the Companies Office. The indicative price range would value the company at between $180 million and $228 million.

The new capital will be used to pay off $3 million in bank financing and fund the company's expansion into the US, targeting Oregon, where it commercially launched in April. ERoad has also entered the Australian market. It might also look at new markets via acquisitions.

"ERoad's transition to a publicly-listed company represents the next step on its path to becoming a global technology leader," said chairman Michael Bushby in a letter to potential shareholders. "ERoad has a highly-scalable technology platform and robust business model, now supported by a further international reference site in the United States."

Founded in 2009, the company has developed GPS software and hardware which allows logistics companies to track their fleet and manage and pay road user charges.

The business first turned a profit of $2.9 million in the year ended March 31, 2014 on sales of $10 million. It forecasts revenue to rise to $19 million in the 2015 year and to $34 million the following year, according to the prospectus. Eroad expects to report a loss of $1 million in 2015 due to listing costs of $2 million, before returning to profit of $5.5 million in 2016. ERoad is also predicting a drop in its retention rate, from 99.3 percent, to 96.5 percent over the next two years.

The company doesn't anticipate paying dividends over the forecast horizon, with surplus funds kept "to capitalise on immediate and future market growth opportunities."

The final price is expected to be announced on July 29, with a listing on Aug. 15. The offer opens on July 30 with a preference pool closing on Aug. 6 and the broker firm offer closing on Aug. 12. The IPO won't have a public pool.

First NZ Capital is the sold lead manager of the offer and Deutsche Craigs is the co-manager.

(BusinessDesk)

Comments and questions
9

This is a competitive space in the market with several significant companies, and two NZ companies (of which e-Road is the smaller of the two) all competing.

e-Road seems to pick up the smaller one and two truck companies while the larger fleets such as Toll, Linfox, Richardson Group and Warren Buffets US Railroad company amongst others go for the more functionality and tech savvy solution that Dean Marris and his twin brother Craig's company International Telematics produces. Rumour has it they may look to list next year.

e-Road seems to be focusing on Oregon, because of a change in the laws - but Oregon is the Opotiki equivalent of the USA. I find this curious as this is hardly the main area for Trucking !

The IPO market has changed and First NZ and Craig and Co are unlikely to find this easy. I see a few First NZ staff and friends have loaded up with stock in e-Road prior, so the Investment statement and disclosures should make for good reading on how much they paid.

Ice hasn't got his facts right. ITL has 3000 vehicles on line whereas EROAD notes it has in excess of 13,000. Also Oregon is the forefather of NZ's RUC system - common knowledge. They established Weight Mileage Tax back in the 20's and 30's and leads the US in heavy vehicle mileage tax - so a logical choice to enter the US market into.
Dean Marris is that confident in the NZ market he has moved his family to the USA to settle there!

ITL has over 15,000 units on line including the North American market. ITL have been in the US for over five years, so just want set the record straight!

Apparently Dean Marris shifted his family to USA rcently, (to live in one of the main hearts of trucking), to get closer to the 30 state dealers that International Telematics has there. International telematics have a presence in over 30 states, not just 1 or 2 e-Road appear to have and have focussed on a key area and a key vertical. Given they have around 7000 units in the USA already (compared to the 100 e-Road claim), and the NZ operation is apparently humming and gaining marketshare - seems a logical move.

pathetic - another wannabe high growth tech company listing itself at a valuation that implies everything must go perfectly forever. The cynic in me - and talk amongst the town - is that shareholders in these tech companies are trying to exploit retail investors naivete when it comes to early stage investment. No wonder institutions dont touch these. Where is the investigative and critical journalism when it comes to this new tech boom ? What happens when these start up growth companies start crashing to the ground like Moa?

Oh well must for fun to slap backs now and celebrate all our maximum potential future potential now, rather than when it actually happens.

Wake up investors. Wake up reporters.

...oh wait it has existed for 20 years and is an extremely crowded space?

I might go "invent" the old nokia brick mobile phone from 15 years ago and float that on the NZX too - alongside ikeGPS and Eroad!

It is a concerning development that staff at the broking firms load up on the stock prior to them IPO'ing. Talk about a conflict of interest!

It may be disclosed and therefore comply with the letter of the law, but it still won't look good in 12 months time when some of these tech pipe dreams come crashing down to earth. Questions should be asked by a more enquiring media!

I think it is unfair to compare eroad to some of the loss making tech companies floated in the past year or two. Eroad is making money and growing at quite a rate. I have been following them for a few years after first seeing them in the deloitte fast 50. I have been waiting to have the chance to invest, a great opportunity.

but it is a terrible investment, at that price.

But you got on, simpleton.