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Interfax reported that Novorossiysk Sea Commercial Port (NSCP) is looking to offer 20% of its charter capital in an upcoming IPO, slated to begin on October 22. According to the arranger of the placement, the company’s fair price is valued at $4.2-5 bln. We believe that such a high valuation could act as a short-term growth driver for the company’s shares. However, we can see no fundamentals for such upbeat estimates.
On October 9, Interfax reported, quoting an undisclosed source, some details of NSCP’s upcoming IPO. The company is expected to offer investors 20% of its charter capital on the Russian stock market and LSE. The road show is to kick off on October 22.
According to the same source, the arranger of the placement values NSCP’s fair price in the range of $4.2-5 bln. Thus, the company plans to raise up to $1 bln for 20% of its shares. According to our estimates, based on NSCP’s consolidated financials for 2006, even the low end of the target band corresponds to EV/EBITDA – 51 and P/E – 95. Meanwhile, average market valuation of European ports is as follows: EV/EBITDA – 15 and P/E – 21. What’s more, similar ratios for the most dynamically growing Chinese ports stand at EV/EBITDA – 20 and P/E – 44.
We believe that such a high valuation of the port by the arranger could act as a short-term growth driver for NSCP’s shares. However, even though the port has a strategic location and traffic flow will grow dynamically, we can see no reasons for such a high valuation. Our 12-month target price of NSCP is $0.083 and we assign them a Sell recommendation.
Vladimir Sergievskiy
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NSCP
Capitalization: $1 155 408 924,00
Common shares:
Price: $0,063
Delta week: 4,2%
Delta month: -10,7%
Delta year: -76,4%
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0.553
1.6
