Etalon sets $7-$9 range on GDRs for placement

Russian developers to approach LSE with listing
Russian property developer, Etalon, has set a price range between $7 and $9 for GDRs in its IPO.

­The range could see the company valued as high as $2.51 billion, and raise up to $650 million when it places an undisclosed number of GDRs through the London stock exchange.  Etalon says it will use the proceeds to buy land, and work with distressed developers.

"The company plans to direct the income from its share placement to the acquisition of new land, and also on capital expenses, including on financing of building expenses for new and existing projects."

Anton Safonov macroeconomic analyst at InvestCafe says that a higher valuation leaves investors exposed to potential downsides similar to other real estate developers who have listed internationally, but that now may be the right time to gain exposure to the real estate development sector.  

“Actually, the company is overestimated.  In my opinion the company may be worth $2-2.3 billion. The market situation is that such companies are trading at an average EBITDA multiplier of 9. Initially, the listing is  aimed at foreign investors, as well as those who have access to trading on the LSE. The success of IPO will depend on the discount to the PIK Company and LSR, taking into consideration that the companies operate in the same segments. Above all, OPIN, Sistema-Hals and LSR are already listed on LSE and after the placement the shares of OPIN fell by 10%, Sistema-Hals by 85% and LSR shares fell by 36.5%. Nevertheless, regarding the development sector the potential for growth is very big. The State is putting efforts to help companies which are involved in residential real estate mass market construction. Therefore, investors may be interested in developer’s shares, more likely at a lower price range.”