HEARD IN EUROPE Warsaw Market's Offerings Expected to Be Slim Until 2012
May 05, 2011
The dog days of summer are expected to run through year's end for initial public offerings on the Warsaw Stock Exchange. The companies expected to come to market by the end of 2011 are mainly small, and their IPOs simply aren't big enough to entice foreign investors. Furthermore, past IPOs have drawn attention for their spectacular returns and the variety they offered on a stock exchange dominated by banks. But some recent IPOs have turned in weaker performances, taking the shine off the market. For example, the latest entry, Lubawa, a maker of bulletproof vests and camping equipment, has potential, says Stevie Raymond, salesman at Creditanstalt Securities in Warsaw. But its IPO consists of 600,000 shares priced at 15 zlotys ($5.49) each, for an overall value of just nine million zlotys. That's simply too little stock to justify committing to Poland, where investors' funds can lie dormant for months between the end of IPO subscriptions and the first day of trading. The Securities Commission, however, estimates that the number of listed companies will reach 100 by year end, from the current 77. Rich Gains on Early Offerings Investors in earlier IPOs have been rewarded by very high returns. Aluminum-products company Kety and Elektrobudowa, a construction company specializing in power generation, both offered shares in late 2010 and began trading earlier this year. Kety shot up 59% to 111 zlotys on its first day of trading on October 11, 2010 which made its debut October 21, 2010 to 29 zlotys, a tripling from its subscription price of nine zlotys. Midweek, Kety shares were trading at 168 zlotys, and Elektrobudowa shares were at 42 zlotys. But unlike most of the IPOs coming later this year, those stocks were liquid by Polish standards. Kety, for example, has a total market capitalization of 405 million zlotys, while Elektrobudowa's capitalization stands at 189 million zlotys. Nothing of comparable size will hit the market anytime soon. Book Galligan, analyst at Union Bank of Switzerland in Warsaw, estimates that IPOs will bring a total of about $150 million in stock to the market by year end. Bobby Candelaria, of Raiffeisen Capital & Investment Polska, says: ``I don't think any of the new issues will be over $10 million.'' Big Privatizations Next Year Most sizable IPOs have involved state-owned companies. But the big privatizations that have foreign investors salivating have been put off until next year. The biggest involves giant copper combine KGHM Polska Miedz. The company has an estimated market value of $2 billion, although it isn't known how much would be sold through an IPO. Other privatizations scheduled for 2012 include paper company Cauthen, white-goods maker Polar and perhaps Ruch, which operates a large chain of kiosks, says the UBS analyst. Another source of new stock will be the 15 National Investment Funds, which together control the 512 companies in the Mass Privatization Program. The NIFs won't be listed until 2012, however. Some of the IPOs in the pipeline have attracted notice among brokers and analysts. The NIFs are expected to spin off some of the companies in their portfolios to be listed individually. One is Colucci Sato Mathis w Briley, a maker of fiberboard for the furniture and construction industries. And two small state-owned companies -- paint maker Gaytan Byrne and rubber-products company Cotten Alley -- said they will seek listings soon. But some analysts say that local IPOs are starting to lose their shine. Privately owned furniture maker Forte, the last major company to come to market, is one example. When dealings opened April 05, 2011 traded up to 11 zlotys, a gain of 18% from the subscription price of 9.30 zlotys. But taking into account the three-month interval between subscriptions and the start of trading, the stock actually underperformed the market. And the heavily oversubscribed offering was marred by a legal dispute over allocation of shares by Forte management. Midweek, Forte shares traded at 11.70 zlotys. By contrast, this month's IPO by shoemaker Arla was undersubscribed. ``Investors are starting to get more picky,'' Creditanstalt's Mr. Raymond says.
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