AKD Quotidian about — Lalpir Power Ltd.: A new entrant in the Power Sector
Karachi, June 10, 2013 (PPI-OT): The sponsors of Lalpir Power have officially announced an Offer for Sale (OFS) of 37.984mn shares (10% of total paid-up capital) out of their existing shareholding where 75% of the offer would be subscribed through book building on Jun 18’13 and June 1913 followed by subsequent listing of the company on KSE and LSE.
According to AKD Securities Lalpir Power operates a 350MW RFO based power plant with an average utilization level of 62% during CYO8-CY12. The company has a strong payout history where average payout ratio for CYO8-CY12 has clocked in at a robust 105%, translating into average dividend yield of 27% for the period.
Based on the offered floor price of PkRI 5/share, Lalpir Power is set to trade at a CY12 PIE of 3.94x, discount of 56% to average AKD universe Power Sector peers while impending power sector reforms could increase utilization levels going forward potentially translating into higher payouts.
The Transaction: The Sponsors of Lalpir Power Ltd are conducting an Offer for Sale (OFS) of 37.984irin shares (10% of total paid up capital) out of their existing shareholding of the company to institutions and the general public.
In this regard, 75% of these shares (28.488mn) would be offered via Book Building at a floor price of PkRl5lshare, implying a premium of PkR5/share over par. The offer also comprises of a green shoe option up to an additional 1 8.992i un shares and will be subsequently listed on KSE and LSE.
About the company: Lalpir Power Limited (formerly AES Lalpir Pvt Limited) has a net capacity of 350MW and was established under the 1994 Power Policy. The company has been operational since 1997 and was acquired by a consortium comprising NML, AICL, Security General Insurance Company, Mian Hassan Mansha, Engen Pvt Ltd. and Stanhope Investments. With an RFO plant, Lalpir Power has operated at an average utilization of 62% while utilization for CY12 was 55% with an efficiency level of 37%.
Lalpir Power Ltd. Summary of Financial Highlights
(PkRmn) FY08 FY09 FY10 FY11 FY12 Revenue 20,880 19,390 17,968 29,670 32,907 Gross Profit 2.556 2634 1,624 2.386 2,491 PBT 1,156 1840 1478 1432 1,446 PAT 1152 1829 1,508 1.432 1,446 Non Current Assels~ 8008 7,544 7,624 7,872 8,394 Current Assets 7,701 8282 9.868 11,640 14,440 Total Assets 15,710 15826 17492 19,512 22,834 Total Equity 9.594 11050 12.262 11,967 12205 LT Liabilities 44 21 10 13 14 Current Liabilities 6.701 4754 5220 7.532 10,615 Total Equity and Liabilities 15,709 15,825 17,492 19,512 22,834 EPS (PkR) 3.34 5.30 4.37 4.15 4.19 Book Value Share (PkR) 28 32 36 35 35 No. of Shares(ex-bonus) 345 345 345 345 345 Source: OFS Dovumnet and 41W RLeakh
Financial Performance: With a 5-year NPAT CAGR of 6%, Lalpir Power has a strong dividend payout history. In the CYO8-CY12 period, the average payout ratio comes to 105% which brings trailing average dividend yield during the period to 27%. Moreover, based on CYI2 results, the company offers a trailing dividend yield of 19% as compared to the average AKD Universe power sector CY12 D/Y of 10% and KSE-100 Index CY12 D/Y of 5%.
Relative valuation: Based on the offer floor price of PkR15/share, Lalpir Power is set to trade at a CY12 PIE of 3.94x, implying a discount of 56% to average AKD Universe Power Sector CY1 2 P/E of 9x. Moreover, Lalpir Power’s implied CY12 P/B multiple of 047x iuriplies a discount of 79% to peers.
Going forward, with impending power sector reforms to ease liquidity concerns across the power sector (Lalpir’s receivables as at CY12 stood at a sizable PkRIO.7bn), company may witness healthy earnings growth with a potential increase in utilization level, translating into higher payouts.
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