By Cara Waters


Adore Beauty’s upcoming listing is this year’s biggest and most anticipated initial public offering but fund managers warn just like many of the items stocked on the online beauty retailer’s platform, the premium product comes at a premium price.

Adore, which stocks cult self-care brands including Aspect, The Ordinary and Aesop, will land on the ASX with a valuation of $616 million on Friday.

Adore is raising $269.5 million at $6.75 a share, including $40 million in new shares with private equity heavyweight Quadrant and Adore’s co-founders Kate Morris and her partner James Height set to cash in part of their stakes.

“I guess it probably is the year’s hottest IPO,” Oscar Oberg, lead portfolio manager at Wilson Asset Management, said.

“To be fair it’s the largest and I think it’s probably the most anticipated. We are very positive on the business,” he added. “We think that Kate [Morris] and [chief executive] Tennealle [O’Shannessy] and Adore management are very good and we love investing in businesses alongside founders that own a significant portion of the shares.”

While Adore’s hefty valuation, at 3.9 times forecast 2020 calendar year revenue of $158.2 million, has come under scrutiny Mr Oberg said the company’s future growth potential was a major drawcard for potential investors.

“Clearly they are a small fish in a very big pond,” he said. “So if this momentum continues I think the valuation will actually look, in one or two years time, very reasonable.”

Mr Oberg pointed to MyDeal’s initial public offering on Thursday, during which the retail marketplace listed at $1 a share and jumped as high as 120 per cent to $2.20, as a good example of investors backing e-commerce businesses.

However, Adore’s high valuation does pose some risk, he added.

“The biggest risk is you have a lot of offshore peers in this e-commerce sector in the US and in Europe that are trading at much higher multiples than their Australian peers are now, if you get a period where those valuations come off that may impact the Australian stocks,” he said.

Andrew Mitchell, senior portfolio manager at Ophir Asset Management, said Adore’s e-commerce credentials were a strong selling point for the company.

“In the current market you are going to have to pay a pretty penny for an industry-leading online business but that is just the reality at the moment and we think it’s worth it in this case.”

Another trend working in Adore’s favour, according to Mr Mitchell, was customer loyalty.

“Repeat business is high with Adore creating a great customer experience, not least of which is the sugar hit you get with the Tim Tam in every delivery,” he said.

“Next up for Adore will be a further extension of the product categories that can be sold to this sticky customer base.