Lalpir Power Limited: First IPO of 2013 : Topline Securities Research

Lalpir Power: First IPO of 2013 : Top line Securities Research

Supported by newly elected govt’s stance on resolution of energy crisis, post-election Pakistan listed power companies gained 16%, making it the best time for public offering of an IPP. With last IPO taken place almost a year ago and total of 3 IPOs in previous year, Lalpir Power will be the first IPO of 2013. The sponsors of the company intend to offer 10% of total paid up capital or 37.98mn shares for sale (though book-building and traditional methods). At base price of Rs15 per share the total offer size translates into Rs569.7mn, which is greater than last 5 year average IPO size of Rs390mn.

With offer for sale at Rs15, Lalpir power will be offered at trailing PE of 3.9 (FY12 EPS Rs3.8) and trailing DY of 18% (FY12 DPS of Rs2.7)

Book-building from June 18

Book-building process to be carried out on June 18-19, 2013 and IPO within 30 days from the last day of book building after which Lalpir Power will become the eleventh IPP to be listed at KSE. The company intends to offer 75% shares of the total offer (28.49mn shares) in book-building at floor price of Rs15, while remaining 25% (9.49mn shares) will be offered to the general public at or below the strike price determined through book-building. Green shoe option of 5% of total paid up capital or 18.99mn shares is also offered to the general public in the case of over subscription.

With positive sentiment prevailing in the market, especially for power sector companies, we believe increasing HNWI and institutions’ participation in the book-building process will result in over subscription and at a much higher than the offer price of Rs15.

About the Company

Lalpir power, formerly known as AES Lalphir (Pvt.) Ltd is based on 1994 power policy. The company started its commercial operations at end of 1997 with 30 years of useful life. The company has net generation capacity of 350MW and is a Furnace oil (FO) based plant. In 2010, a consortium led by Nishat group acquired the company at Rs14.9 per share.

Focusing towards efficient electricity production, Lalpir power plans to replace its steam turbine rotors, a move which is likely to improve the plant’s efficiency by 2%. The expected replacement is to be completed before August, 2014.