Building products company Boise Cascade (NYSE:BCC) enjoyed some strong demand for its initial public offering. The company boosted its price range before the deal, from $16-$18 to $18-$20, and was then able to price the deal at $21.
Apparently it even looked like a bargain there, as investors have bid up BCC shares 20% in early Wednesday trading.
Founded in 1957, Boise Cascade is the No. 2 player in the manufacturing of laminated veneer lumber, I-joists and plywood in North America, and it’s also one of the largest stocking wholesale distributors of building products. BCC currently has more than 4,500 customers, which include wholesalers, home improvement centers, lumber yards and industrial converters.
For the most part, BCC’s products used for new residential construction, repair and remolding; thus, it’s a big play on the rebound in the real estate market. That business has been a big attraction for IPO investors, as seen in the initial demand for the TRI Pointe Homes (NYSE:TPH) deal — though TPH has cooled off in its first few days of trading.
Even during the market downturn, BCC continued to invest in its infrastructure, which now consists of 18 manufacturing facilities and 31 distributions centers. It also made heavy expenditures on state-of-the-art equipment, which has led to lower costs and higher quality.
The payoff includes a 22% increase in revenues to $2.1 billion for the first nine months of 2012, as well as a $40.2 million profit after a $32.6 million loss in the year-ago period.
There’s plenty of good news on the real estate front that bodes well for BCC. Interest rates are at extremely low levels and housing supply is fairly tight. November housing starts rose by 22% to 860,000 — a big improvement, even though those numbers are well below historical levels (before the market plunged, annual housing starts hadn’t dipped below 1 million since 1955).
All in all, it’s plenty feasible that the housing rebound is real and sustainable, which means plenty of growth potential for BCC.
Tom Taulli runs the InvestorPlace blog IPO Playbook, a site dedicated to the hottest news and rumors about initial public offerings. He is also the author of “How to Create the Next Facebook” and “High-Profit IPO Strategies: Finding Breakout IPOs for Investors and Traders.” Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.
A long-time follower of the IPO scene, back in 1999 Tom started one of the first sites in the space called WebIPO. It was a place where investors got research as well as access to deals for the dot-com boom. Tom also wrote the top-selling book, Investing in IPOs. In it, he covers all the aspects of analyzing an IPO, such as reading the prospectus, detecting the risk factors and understanding some of the arcane regulations. But don’t worry — if that process is too intimidating for you, thankfully Tom will do the legwork for you right here in the IPO Playbook blog.
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