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Brokerage houses back Phoenix Power share offer.

Muscat: Research analysts of various brokerage houses in Oman have strongly recommended subscription to the initial public offering (IPO) of Phoenix Power, with an expected listing of the share between 130 baisas and 144 baisas on the Muscat bourse. Phoenix Power Company, which floated a OMR56.3-million initial public offering on May 10, will close subscription on June 8. The issue price is 110 baisas per share. It will be listed on June 22. Research analysts highlighted the strategic importance of the largest power plant to the country's power sector, stable business profile, attractive dividend yields and proven track record of the strong group of committed founding shareholders as key factors underpinning the positive investment case for the IPO. "We believe that Phoenix Power (under transformation) offers 30 per cent upside to the issue price of 110 baisas. We have arrived at a one year target price of 143 baisas per share using a blended DCF and DDM methodology," said Oman Arab Bank - Investment Management Group (IMG). The shares have been priced at 110 baisas per share, inferring a total offer size of OMR56.3 million and an expected market capitalisation on listing of OMR161 million. The share offer is available for both Omanis and foreign residents. The primary issue is divided into two categories, on the basis of size of subscription. Allotment of shares As many as 65 per cent is reserved for the first category, who apply for shares between 1,000 and 600,000, while the second category is institutions and high-net worth individuals who apply for shares between 600,100 and 51,191,000. "Considering the support of strong founders, experienced management and an attractive dividend yield we recommend to subscribe to the IPO with a target price of 130 baisas providing an upside of 18.18 per cent from the issue price of 110 baisas," noted Shurooq Securities. Echoing a similar view, Al Maha Financial said; "We value Phoenix Power at OMR0.144 per share and recommend investors to 'subscribe' to the offer with an upside potential of 30.5 per cent from the issue price of OMR0.110, in view of the expected listing gains and attractive dividend yields." Peter Jones, executive managing director of Phoenix Power, said: "The recommendations for the Phoenix Power IPO are a reflection of the confidence of the analyst community in the business potential of Phoenix Power. We have received positive feedback from analysts on the strength of the offering. It is pleasing to see a positive analyst consensus which reflects the sentiment of the investors we've met so far, both Omanis and non-Omanis." "We're positive that investors will appreciate the offer, not just on a scale of returns on investment, but also to leverage the opportunity offered by the sector," he added. 'Fair value' "We estimate a fair value of 129 baisas for Phoenix Power based on a two-stage discounted cash flow valuation model that assumes a higher discount rate for the company post PPA termination," noted Fincorp. United Securities also said; "With a strong offering such as this and based on our market research, the company's background and potential growth, we estimate a target price of 137 baisas for Phoenix Power. We recommend investors to invest in this opportunity based on the scale of returns." "We strongly recommend investors to 'subscribe' to the Phoenix Power offer as we estimate a target price of 142 baisas, based on the offer strengths and our analysis," added National Bank of Oman. As the largest power plant in Oman, the contracted plant's power capacity of 2,000 megawatt represents 27.8 per cent of the main interconnected system.

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Publication:Times of Oman (Muscat, Oman)
Geographic Code:7OMAN
Date:Jun 1, 2015
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