On Friday, large Russian developer LSR Group announced the placement price for its IPO at $72.50 per share and $14.50 per global depositary receipt (GDR). The placement price is set in the middle of the previously narrowed target band of $70-75 per share and $14-15 per GDR.
The shareholders floated 10,643,618 shares in an IPO, which corresponds to 12.5% of the company's charter capital, not including an additional stock offering. Based on the placement price, the shareholders managed to raise around $772 mln, of which $600 mln is to be allocated to buy out an additional issue of 8,514,896 shares (10% of the existing charter capital) in order to return the funds directly to the company.
We are upbeat on the results of LSR Group's share placement, which enabled the company to raise around $600 mln to roll out its business projects, boost land bank and expand production facilities. Specifically, LSR Group plans to commission a 1.8 mln ton cement facility by 2010 to meet in-house needs and sell the plant's products on the open market.
In our opinion, the company's vertical integration, diversified developer project portfolio in various segments of the residential and commercial real estate market and the group's strong foothold on the rapidly growing construction materials market will enable LSR Group to retain robust earnings growth and strong margins, including due to the synergetic effect amid higher construction materials prices on the domestic market.
According to our estimates, the estimated fair price of LSR Group is $95.60 per share.
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