Market confidence: Investors scramble to buy Lalpir stock

Stock price hits upper lock within minutes of trading.

KARACHI:

On its first day of listing on the Karachi Stock Exchange (KSE), Lalpir Power hit its upper lock as soon as the trading session began on Tuesday with the ceremonial gong striking ceremony on the Karachi Stock Exchange trading floor.

The price of Lalpir Power, whose symbol on the bourse is LPL, increased 5% to Rs23.10 within minutes of the beginning of the trading session. The stock was offered at Rs22 per share. With a price appreciation of Re1.10, the total turnover in the Lalpir stock on Tuesday was 461,500.

An independent power-producing company based out of Muzaffargarh, Punjab, Lalpir Power has a gross production capacity of 362 megawatts.

“According to our estimates, the fair price of the stock is Rs24.50. We expect trading in this stock will remain bullish in the next few days,” said AKD Securities’ Vice President for Investment Banking Syed Khurram Shahid while speaking to The Express Tribune after the gong-striking ceremony. AKD Securities, along with Next Capital, served as arranger and book runner for the offer.

Shahid said his brokerage house estimates the company will post earnings per share of Rs3.5-Rs4.0 in December. “I believe the share price might increase to around Rs28 by the end of the calendar year,” he added.

The company, which is part of Mian Muhammad Mansha’s business empire, unveiled its plan to sell 37.9 million ordinary shares – or 10% of its total paid-up share capital through a two-phase process in June.

In the first phase of the sale of shares, also referred to as the book-building portion of the sale of shares, that took place on June 18 and 19, the company offered 28.4 million ordinary shares – or 75% of the total offer size – at a floor price of Rs15 per share to institutional investors and high net-worth individuals. The response was overwhelming, as buyers oversubscribed the offer 5.9 times.

Afterwards, book runners for the offer determined the cut-off/strike price of Rs22 per share through the Dutch Auction Method, an auction structure in which the price of the offering is set after taking all bids and determining the highest price at which the total offering can be sold.

The first phase was followed by the general public portion, which put 9.4 million ordinary shares of the company, or 25% of the total offer size, up for grabs.

However, the response by retail investors remained subdued as the offer was only slightly oversubscribed. Analysts polled by The Express Tribune at the time attributed the passive response of the general public to two factors: a general lack of excitement due to inherent business risks and a perception among the general public that the stock was overpriced at Rs22 a share.

According to AKD Securities CEO Farid Alam, while the share price is expected to rise to Rs25 in the near future, fundamentals should change for it to go over that level. “For such kind of stock, I think it is much better if it keeps giving out dividends regularly while its price stays around Rs25,” Alam told The Express Tribune.

Published in The Express Tribune, August 21^st, 2013.

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