Global Ports breaks Russian IPOs pricing curse

June 30, 2011

By Jason Bush
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

MOSCOW — Russian IPOs face a tough sell among international investors, who know from experience they tend to be over-priced. But the strong showing of the latest one, by Global Ports, suggests that Russian issuers may be getting the message at last: to overcome well-founded investor scepticism, Russian IPOs need be priced at an attractive discount.

Not only has the Russian ports operator managed to pull off its $588 million IPO at the height of Greece-related market turmoil, but the performance has been impressive. At the close of the first day’s unconditional trading on June 29, the share price was up 18 percent on the offer price.

That’s highly unusual for a Russian IPO. True, search engine Yandex was an even bigger hit last month –- but that says more about internet fever than love of Russian IPOs. Out of thirteen Russian listing attempts this year, seven have been pulled. Of the six that got away, only Global Ports and Yandex are now up on their IPO price.

So what made Global Ports different? It helps that the company, which owns five container terminals and an oil terminal, has a fast-growing business –- Russia’s underdeveloped container market has risen by 18.6 percent per annum over the last decade. It also helps that the owner, transport conglomerate N-Trans, has already pulled off two successful IPOs in the railway freight and road building segments, both of which are presently up over 30 percent on their issue price.

But even with these pluses, the offering wouldn’t have been a hit if it had fallen victim to the normal Russian curse –- a greedy valuation. Global Ports and its bankers appear to have got the message that investors require decent upside. The $2.3 billion capitalisation implied by the IPO price was 25 percent below the $3 billion analysts’ estimate. And the company’s enterprise value stood at 8 times 2011 forecast EBITDA, compared with a multiple of around 13-14 times for other emerging market port operators.

Whether Global Ports’ success represents the start of a trend towards realistic pricing by Russian companies remains to be seen. The most recent Greek crisis may have dampened temptations to be greedier. But at least it’s no longer just internet stocks that can break the Russian IPO curse.

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