Avangard announces indicative price range of USD 13.8-17.8/GDR

Yesterday Avangard announced an indicative price range of USD 13.80-17.80 per GDR for its IPO, with 10 GDRs equal to one ordinary share in the company. The range implies a pre-money equity value of USD 690-890 mln and total offering size of USD 198-256 mln. Avangard is offering up to 1,250,000 new ordinary shares (12,500,000 GDRs) or 20% of its fully diluted post-IPO share capital. Avangard said it expects to announce the price at which GDRs will be sold and conditional dealings in the GDRs to commence around April 30, with admission and unconditional dealings around May 7. Avangard is the #1 producer of shell eggs and egg products in Ukraine. Avangard said it plans to use placement proceeds to finance expansion and diversification of its egg business through capital expenditures. In 2009, Avangard posted revenue of USD 319.9 mln and EBITDA of USD 152.1 mln. Ruslan Patlavskyy: We see a high likelihood of a successful placement, given Avangard’s strong domestic market share (23% in shell egg output, and 52% in all dry egg products in 2009) and vertically integrated business model. Additional factors are high operating efficiency (2009 EBITDA margin: 48%, based on publicly available financial highlights) and low net debt (2009 net debt/EBITDA: 0.7x) provided the quality of the company’s financial statements. Based on the financial highlights publicly disclosed by the company, the USD 13.8-17.8/share range implies placement at 5.2x-6.5x FY2009 EV/EBITDA, which suggests 27%-42% discounts to publicly traded  Ukrainian agricultural stocks (median: 9.0x). The said price range is comparable to that of recently completed Russian Sea as well as potential Rusagro (both – Russia) placements at 6.7x and 6.8x-8.3x respectively on 2010 EV/EBITDA.