Ovostar fulfills pre-IPO plans, starts new CapEx stage

Ovostar Union (OVO PW), the Ukrainian egg producer, reported the completion of stage one of its investment program (that it planned to finance from IPO proceeds) yesterday. The company noted that the full effect will be visible in 2013 when the company plans to increase shell egg output 1.8x and egg products volume 1.9x compared to 2010. Earlier, the company reported it had spent USD 46.5 mln on the program, including USD 31 mln received from its IPO in 2011. Ovostar also outlined a new USD 35 mln stage of its investment program for the remainder of 2012 and 2013 to increase shell egg production capacity a further 1.5x and egg product capacity 1.2x, as well as to modernize infrastructure.

Alexander Paraschiy: Ovostar looks like one of few recent Ukrainian companies that fully met its pre-IPO investment commitments. Remarkably, the company remained unleveraged as it implemented this program, ending 1H12 with net cash of USD 8.1 mln. While we admit the company should face tough times in 2H12 as prices for soft commodities, its key cost factor, are on the rise, the company’s lack of leverage makes us comfortable that it will be able to find financing for its new expansion plan, should it need to tap outside sources. So far, the key risk we see for the company is its ability to utilize the increased capacity.