Engro Fert trading to commence tomorrow
Analysts cautious despite positive response from retail investors.
The general public portion offering retail investors a total of 18.75 million shares, or 25% of the total issue size, and the cut-off price was oversubscribed 3.4 times. PHOTO: INP/FILE
KARACHI:
Following the conclusion of the last portion of the Initial Public Offer (IPO) of Engro Fertilizers, trading in the company’s stock will commence on Friday, according to a notification posted on the website of the Karachi Stock Exchange (KSE) on Wednesday.
Speaking to The Express Tribune, AKD Securities Vice President for Investment Banking Syed Khurram Shahid said that the general public portion of the IPO was oversubscribed 3.4 times, which reflects the trust that retail investors have in the country’s leading fertiliser manufacturer. AKD Securities and Next Capital serve as the book-runner for the issue.
Engro Fertilizers announced last November it would issue 75 million ordinary shares in an IPO consisting of book-building and general public portions. The money raised through the IPO will be used to fund development capital expenditures for securing additional gas supplies along with the balance sheet restructuring to optimise the company’s capital structure, it said.
As a result, the book-building portion of the IPO, which comprised 75% of the total issue size, determined the stock’s cut-off/strike price at Rs28.25 per share. It was oversubscribed 3.9 times.
Subsequently, the general public portion offering retail investors a total of 18.75 million shares, or 25% of the total issue size, and the cut-off price was oversubscribed 3.4 times. Shahid said the book-runners received applications for shares worth Rs1.8 billion as opposed to Rs529.6 million that the company intended to raise in the general public portion.
Speaking to The Express Tribune, Elixir Securities Head of Equity Strategy Retail Muhammad Ali Taufiq said the stock price is going to go up considerably in the near future based on its strong fundamentals. “The concern about gas availability may not be as serious as (it was) last year,” he said.
Engro Fertilizers has faced problems in getting natural gas that the government promised to provide the company’s Deharki plant at a price of $0.75 per million British thermal units (mmbtu).
Taufiq noted that he foresees the stock trading around Rs40 a share by the end of June. It means he expects the stock price to surge over 40% in less than six months.
However, he hastened to add that his price estimate reflects a trader’s perspective on the stock as opposed to the perspective of a research analyst.
In contrast, Standard Capital Securities Head of Research Faisal Shaji does not appear to be overly optimistic about the stock performance at least in the short term. He expects the company’s share to trade in the range of Rs30-Rs40 by the end of the current fiscal year.
Shaji says that long-term debt of the company has already been transferred from the books of its holding company (Engro Corp) to those of Engro Fertilizers, making the latter heavily leveraged. “Trading is going to be volatile in nature for some time. Besides, the company is not expected to announce dividends in the next couple of years at least,” he added.
However, Shaji says his house expects the company is likely to get gas at the promised rate given the good relations it enjoys with the current government. “This will likely lead to an increase in the share price of its holding company, which can go as high as Rs250 by June (compared to Rs168.17 on Wednesday)” he added.
Published in The Express Tribune, January 16th, 2014.
Following the conclusion of the last portion of the Initial Public Offer (IPO) of Engro Fertilizers, trading in the company’s stock will commence on Friday, according to a notification posted on the website of the Karachi Stock Exchange (KSE) on Wednesday.
Speaking to The Express Tribune, AKD Securities Vice President for Investment Banking Syed Khurram Shahid said that the general public portion of the IPO was oversubscribed 3.4 times, which reflects the trust that retail investors have in the country’s leading fertiliser manufacturer. AKD Securities and Next Capital serve as the book-runner for the issue.
Engro Fertilizers announced last November it would issue 75 million ordinary shares in an IPO consisting of book-building and general public portions. The money raised through the IPO will be used to fund development capital expenditures for securing additional gas supplies along with the balance sheet restructuring to optimise the company’s capital structure, it said.
As a result, the book-building portion of the IPO, which comprised 75% of the total issue size, determined the stock’s cut-off/strike price at Rs28.25 per share. It was oversubscribed 3.9 times.
Subsequently, the general public portion offering retail investors a total of 18.75 million shares, or 25% of the total issue size, and the cut-off price was oversubscribed 3.4 times. Shahid said the book-runners received applications for shares worth Rs1.8 billion as opposed to Rs529.6 million that the company intended to raise in the general public portion.
Speaking to The Express Tribune, Elixir Securities Head of Equity Strategy Retail Muhammad Ali Taufiq said the stock price is going to go up considerably in the near future based on its strong fundamentals. “The concern about gas availability may not be as serious as (it was) last year,” he said.
Engro Fertilizers has faced problems in getting natural gas that the government promised to provide the company’s Deharki plant at a price of $0.75 per million British thermal units (mmbtu).
Taufiq noted that he foresees the stock trading around Rs40 a share by the end of June. It means he expects the stock price to surge over 40% in less than six months.
However, he hastened to add that his price estimate reflects a trader’s perspective on the stock as opposed to the perspective of a research analyst.
In contrast, Standard Capital Securities Head of Research Faisal Shaji does not appear to be overly optimistic about the stock performance at least in the short term. He expects the company’s share to trade in the range of Rs30-Rs40 by the end of the current fiscal year.
Shaji says that long-term debt of the company has already been transferred from the books of its holding company (Engro Corp) to those of Engro Fertilizers, making the latter heavily leveraged. “Trading is going to be volatile in nature for some time. Besides, the company is not expected to announce dividends in the next couple of years at least,” he added.
However, Shaji says his house expects the company is likely to get gas at the promised rate given the good relations it enjoys with the current government. “This will likely lead to an increase in the share price of its holding company, which can go as high as Rs250 by June (compared to Rs168.17 on Wednesday)” he added.
Published in The Express Tribune, January 16th, 2014.