Subscribe to Gujarat Pipavav Port at the lower end: Edelweiss
Edelweiss has recommended investors to subscribe to the initial public offering of Gujarat Pipavav Port at the lower end of the price band.
By ET Bureau |
MUMBAI: Edelweiss has recommended investors to subscribe to the initial public offering of Gujarat Pipavav Port at the lower end of the price band.
Gujarat Pipavav (GPPL), a port company located on India’s West coast, promoted by APM Terminals (holding ~58% stake in GPPL, post issue ~43%), is tapping the equity market with 115.9 million shares (fresh issue of 104.2 million and offer for sale of 11.7 million shares) at Rs 42–48 per share, aggregating Rs 4.8-5.5 billion.
“We have factored in 20% volume growth until 2016 i.e., ~95% capacity utilisation at the port (~19 mn tonnes of cargo handled). On the margin front, we expect EBITDA to expand 65% from 30% currently and then plateau CY13 onwards.
Considering the concession is valid till 2028, our NPV-based valuation of INR 17.3 bn (~ INR 41 / share) is based on cash flows accruing for the next 17 years only. Key upside risks are scale up of volumes and margins greater-than-our-assumptions. We have not considered any value accruing from the surplus land parcel of ~800 acres close to the port.
Considering that GPPL is yet to report profits, intensifying competition from neighbouring ports and risks arising from other shipping lines not partnering with the APM Terminal for their cargo, we believe the flip side is not factored in. However, considering the significant earnings growth over the near term (~50% CAGR CY10-13E) and attractive EV/EBITDA, the valuation is at a discount compared to Mundra Port. We recommend ‘SUBSCRIBE’ at the lower end,” the report said.
As on August 24, till 5 pm, the issue was subscribed 0.23 times. Qualified Institutional Buyers portion was subscribed 0.10 times, Foreign Institutional Investors portion was subscribed 0.59 times per cent and retail investors portion was subscribed 0.32 times.
Gujarat Pipavav (GPPL), a port company located on India’s West coast, promoted by APM Terminals (holding ~58% stake in GPPL, post issue ~43%), is tapping the equity market with 115.9 million shares (fresh issue of 104.2 million and offer for sale of 11.7 million shares) at Rs 42–48 per share, aggregating Rs 4.8-5.5 billion.
“We have factored in 20% volume growth until 2016 i.e., ~95% capacity utilisation at the port (~19 mn tonnes of cargo handled). On the margin front, we expect EBITDA to expand 65% from 30% currently and then plateau CY13 onwards.
Considering the concession is valid till 2028, our NPV-based valuation of INR 17.3 bn (~ INR 41 / share) is based on cash flows accruing for the next 17 years only. Key upside risks are scale up of volumes and margins greater-than-our-assumptions. We have not considered any value accruing from the surplus land parcel of ~800 acres close to the port.
Considering that GPPL is yet to report profits, intensifying competition from neighbouring ports and risks arising from other shipping lines not partnering with the APM Terminal for their cargo, we believe the flip side is not factored in. However, considering the significant earnings growth over the near term (~50% CAGR CY10-13E) and attractive EV/EBITDA, the valuation is at a discount compared to Mundra Port. We recommend ‘SUBSCRIBE’ at the lower end,” the report said.
As on August 24, till 5 pm, the issue was subscribed 0.23 times. Qualified Institutional Buyers portion was subscribed 0.10 times, Foreign Institutional Investors portion was subscribed 0.59 times per cent and retail investors portion was subscribed 0.32 times.
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