The shares have now been priced at 175p, valuing Heal's at pounds 21.3m. On earnings last year of 12.27p, that puts the shares on a historic multiple of 14, or 17.4 after adjustments, a discount to the stores sector.
One drawback for smaller punters is that this is only a placing so investors not linked to a broker can only buy shares after dealings start on 24 March. Another is that Heal's is coming to the market in a period of some uncertainty. The marathon election campaign is unsettling and whichever party wins, the stock market is expecting higher interest rates, which could affect sales of higher ticket items, such as beds and sofas. There have also been signs of a slowdown in some parts of the retail market in recent months.
Against that is the prospect of windfall bonuses from the Halifax, Woolwich and other mutual society flotations. Heal's ought to benefit from this.
The trick for the company will be to expand its store portfolio from its base of three into a larger chain without drifting downwards into the mass market. The company is raising pounds 1.8m to fund expansion and is looking at around 10 stores in total, which looks about right. So far Heal's has two stores in London and one in Guildford, so there is plenty of room for growth in the UK before moving into buoyant overseas retail markets like Dublin.
Heal's is always going to a cyclical company whose fortunes are linked to the housing market. And competition will come not just from Habitat and the Conran Shop, but department stores such as the mighty John Lewis. So there are threats, but with a strong brand name, the competitively priced shares are still worth a look.