Predictably, there’s a lot of media hoopla circulating about the imminent Royal Mail flotation, but scant actual analysis about whether or not it will be at an attractive valuation.
ExpectingValue has shared his thoughts here: http://is.gd/ePo1l1
I’m just going to look at some numbers. Royal Mail has 1bn shares in issue (no new Ordinary Shares are to be issued under the Offer, according to note E.6), of which it will sell between 401m – 521.7m shares in the £2.60-£3.30 price range. The whole company post flotation will therefore be worth £3.3b, assuming that the upper price range applies.
Looking at the short prospectus (PDF: http://is.gd/EG5k2v), and sticking my fingers in the air, it has revenues of around £8.8b, and an EBITDA of around £700m. That puts them on a PSR of 0.38, and an price to EBITDA of 4.7. Looks cheap. As one analyst put it, “they’re priced to go”.
It is expected that they will yield 6.1% – 7.7% – way in excess of current market yields.
They’ll be a lot of political incentive to ensure that this flotation succeed.
Conclusion: stag ‘em
Filed Under: Royal Mail,