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ALROSA Confirms 16% Listing
Analysts Expect a Valuation of $7B to $8B
Oct 2, 2013 5:21 AM
By Avi Krawitz
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RAPAPORT... ALROSA announced Wednesday that it will list 16 percent of its shares on the Moscow Stock Exchange, as it prepares to officially start marketing to investors. The diamond mining giant reported that the Russian Federation and Yakutia Republic will offer 7 percent each. In addition, Wargon Holdings, which is controlled by ALROSA, will offer 2 percent to help ALROSA repay existing debt.
Analysts expect the listing to raise about $1 billion, pricing the shares at about $1 each and valuing the company at approximately $7 billion.
“Looking at ALROSA’s numbers, a valuation of $7 billion to $8 billion is probably justified,” said Dinnur Galikhanov, senior analyst for metals and mining at ATON Equity Research.
Galikhanov added that previous suggestions of a $1.35 to $1.50 per share would be excessive at this time and he proposed that a number of conditions need to be met before such valuation is achieved.
He suggested that the company will need to complete its transition from open pit to underground mining at the four mines where these projects are underway and expected to complete in 2015/16. In addition, Galikhanov stressed that ALROSA will need to demonstrate that it can keep its costs under control to justify a higher price tag.
Most importantly, he explained that the share will be influenced by the uncertain state of the global economy and the diamond market. “The biggest point of uncertainty, which should guide investors, is where the diamond market will be heading in the next couple of years,” he said. “If they believe the economy will recover and push diamond prices up, then they would want to buy ALROSA. But if you’re more cautious and feel that this period of small percentage [economic] growth will continue, then it’s probably worth waiting for the share price to fall to a more attractive level before buying the stock.”
Fyodor Andreev, ALROSA’s president, said that he expects the offering will help the company reinforce its position in the global diamond industry.
ALROSA is considered the largest diamond miner by volume with production of around 34 million carats a year. The company is the second largest by revenue, just behind De Beers. Group revenue during the first six months of 2013 increased 7 percent year on year to $2.55 billion (RUB 82.23 billion), while profit fell 10 percent to $453 million (RUB 14.62 billion) due to foreign exchange losses and higher interest expenses.
While the announcement on Wednesday was the first formal confirmation of the offering by ALROSA, the company did not provide a timeline for the listing.
The shares will trade on CJSC MICEX Stock Exchange, which is a subsidiary of the Moscow exchange, under the ticker symbol “ALRS.”
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Tags:
Alrosa, Aton, Avi Krawitz, diamonds, Rapaport, Yakutia
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