Citigroup Predicts IPO Decline in 2007
In 2007, the companies of Russia will hardly attract through IPO more money than in 2006. Then, the placing wave will drop to the 2005 level, Citigroup analysts said in the Made in Russia outlook of IPOs. Despite that Russian companies are probably the best on emerging markets, the root cause of today’s panic sales could be an attempt to avoid risks of 2008.
Even though 2007 will see the record number of Russia’s IPOs, the yield will hardly match the 2006 amount, Citigroup Global Markets (ÑGM) analysts concluded in the Made in Russia report.
On aggregate, 16 big IPOs (including Rosneft) will generate around $20 billion in 2006, CGM said. The 2007 plans set forth 32 IPOs of similar level, including by Sberbank, VTB, GAZ, Itera, Kuzbassrazrezugol and Svyazinvest. But the average amount will hardly exceed $18.4 billion. Both the number of IPOs and receipts generated through them will materially go down in 2008 – 18 IPOs are forecasted to yield just $4.7 billion.
The reason of imminent decline in 2008 is the sharp increase both in political risks and in macroeconomic risks attributed to reduction in crude prices.
Nearly in all parameters, Russia’s securities are leading on emerging markets, CGM report said. For initial or secondary placement, Russia’s companies have 7 to 10-percent advantage vs. an average IPO competitor from Eastern Europe, Brazil, India and China. In terms of underestimated assets, the attractiveness of Russia’s raw companies is 65 percent above analogues (non-raw companies have 40 percent), the growth potential of non-raw companies is 17 percent better than the potential of competitors (raw companies yield 2 percent to 3 percent), while the management efficiency is 5 percent to 8 percent above analogues.
www.kommersant.com
All the Article in Russian as of Nov. 14, 2006
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