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| Summary of Contents IPO FLASH Snowman Logistics - Snowman Logistics is coming out with an initial public offering of 4.2 crore equity shares of face value of Rs10 each. Post-issue, the shareholding of the promoters in the company will fall to 40.4% from the current holding of 54.0%. The issue is priced at Rs44-47 per share and the company intends to raise Rs197 crore at the upper price band. The company plans to use the proceeds to set up new temperature-controlled and ambient warehouses and meet its long-term working capital requirement.
- At the upper price band of Rs47, the company is priced at enterprise value/earnings before interest, tax, depreciation and amortisation of 24.0x FY2014 earnings. However, the company's aggressive expansion plan for increasing its pellet capacity from 61,543 pellets in FY2014 to 85,000 pellets in FY2015 and further to 100,000 pellets by FY2016 is likely to boost the operating performance of the company over the next two years. Further, the company's presence in a niche segment with a strong management pedigree improves its growth prospects. We recommend subscribe.
STOCK UPDATE Gateway Distriparks
Recommendation: Buy
Price target: Rs310
Current market price: Rs259 Snowman listing positive trigger; price target revised to Rs310, Buy maintained Key points - Gateway Distriparks Ltd (GDL)'s existing subsidiary, Snowman Logistics Ltd (SLL), has announced an initial public offering in the band of Rs44-47 per share, which is higher than the expectations of around Rs38-40 per share. GDL has thus appreciated by close to 14-15% over the last few days on the back of the anticipated listing of its cold chain business, SLL. SLL's possible listing was highlighted as a re-rating trigger by us in the previous updates on GDL due to the value unlocking that it would result in for the minority shareholders of GDL.
- In our valuation of GDL (based on the sum-of-the-parts method where all three businesses, CFS, rail freight and SLL, are valued separately), we had conservatively valued the SLL business at Rs24 a share (even lower than the price of Rs35 a share paid by Norwest Venture Partners for buying 1.7 crore shares in SLL). Hence, we see scope for upgradation of our price target by close to Rs30 a share. Thus, we maintain our Buy rating on GDL with a revised price target of Rs310.
- Fundamentally, we have a positive view on the logistic sector, which has high operating leverage and could be an early beneficiary of a revival in the domestic economy. GDL is among our preferred long-term picks in the logistic sector along with Container Corporation of India.
| | | Sharekhan Limited, its analyst or dependant(s) of the analyst might be holding or having a position in the companies mentioned in the article. | |
| Regards,
The Sharekhan Research Team |
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