You're reading: KDM Shipping powers through tough market for downsized IPO

Ukraine’s first initial public offering in a year is set to go through despite tough market conditions.

While Ukrainian maritime
transport major KDM Shipping’s IPO is a relative success, the lower
size and price of the issue suggest some time may pass before more
Ukrainian companies opt to go public.

Ukraine’s largest
privately owned river and sea transport company will issue 796,000
shares for a price of 32.4 Polish zloty ($10), representing a 10.9
percent stake in the company. This is short of the firm’s initial
hopes to sell a 35 percent stake for 36 zloty a share.

Trading is to begin on
Aug. 9, with 91 percent of the $7.5 million stake going to
institutional investors, with retail buyers making up the rest. The
initial price tag put the value of KDM Shipping at around $105
million – a figure some experts judged as overly optimistic. The
current implied value is closer to the more realistic figure of $70
million.

“They’re rather
poor – just 22 percent of planned new shares might be bought by
investors,” said Andriy Patiota, senior equity analyst at
Kyiv-based investment bank Art Capital, commenting on the outcome of
the IPO process. “At this
juncture, lots of companies would have given up. KDM dared.”

It’s not quite what we
hoped for, admitted Andrey Supranonok, general director of Jaspen
Capital, a co-underwriter for the deal with KBC Securities. “But it
is still pretty good given the particularly difficult markets.”

“All things
considered, from an objective point of view this week’s IPO is a
great result for KDM Shipping, the Warsaw Stock Exchange, and
Ukrainian businesses,” Jon Queen, Jaspen Capital, managing
director, added by email. “This is because KDM Shipping has
a strong individual story. It is a growing company that operates in
aniche high margin business sector, so its story is only beginning.”

KDM Shipping’s pre-IPO
structure had company founder and owner, Konstantyn Molodkovets,
holding 78.5 percent of company shares. His brother, Denys
Molodkovets, the chief financial officer, held a further
11.5 percent.

Proceeds will go to increase the scope of operations
and expand the company’s fleet – currently made up of eight
Soviet-era vessels – the IPO prospectus reads. The reduced scale of
the public offering, however, means a planned reconstruction of the
company’s main port in Kherson will likely be put on hold.

“Going public is part of our long-term
strategic development plan,” Konstantyn Molodkovets told Polish
business daily Parkiet. “Though the attracted capital is less than
we hoped for, it will allow us to start expanding out fleet and
operations.”

According to its director, the company has already inked a $54
million deal with Chinese producers for four additional ships.

KDM Shipping is now set to become the
11th company on the Warsaw-based WIG-Ukraine index. The
latter remains dominated by agribusiness,
which makes up 7 of 10 comprising firms, which has
repeatedly caused Polish investors to
complain about the lack of diversity.

While it is unlikely other companies will follow KDM
Shipping in the immediate future, analysts claim that as many as 10
Ukrainian businesses could go public is market conditions improve.

Kyiv Post staff
writer Jakub Parusinski can be reached at
[email protected]