You're reading: KDM Shipping Warsaw public offering plans buck trend

KDM Shipping, a major in Ukraine's marine transport business, is seeking to raise $36 million on the Warsaw Stock Exchange. Despite jittery markets analysts expect Ukraine's first listing in a year to go through, bringing some diversity to Warsaw's agribusiness-dominated Ukraine index.

Just as renewed debt
problems in Spain, Italy and Greece are driving markets into the red,
some companies are ready to take their chances and go public, perhaps
fearing worse times ahead. Among them is KDM Shipping, Ukraine’s
biggest privately owned company in the river and sea transport
sector, which is looking to Warsaw for a cash injection.

According to the
company’s prospectus, it is hoping to issue up to 10,000,000 shares
for a maximum price of 36 zloty ($11), amounting to $36 million for a
35 percent share in the company. The final
price is to be announced after the subscription period comes to an
end on July 24.

At present the company’s
founder and owner, Konstantyn Molodkovets, holds the biggest stake in
KDM Shipping with 78.5 percent of shares. His brother Denys
Molodkovets, the business’ chief financial officer, holds a further
11.5 percent.

The company hopes trading
in its shares will begin around Aug. 9. Many companies have backed
out of an IPO deal at this point, and some have analysts have
questioned the valuation of the company – suggesting the implied
$105 million price tag was too high. Nonetheless, a deal now looks
fairly realistic.

“I would say the
chances are around fifty-fifty,” said Andrey Patiota, an analyst at
Kyiv-based investment bank Art Capital. The question is the price, he
added, so the owners might have to settle for less than they hoped
despite a stable earnings ratio and rising profits.

In 2011 the company saw
$29.2 million in revenue and $14.2 million in net profits. A year
earlier those figures were $13.9 million and $5.1 million,
respectively.

“The financial
indicators for the first six months [of 2012] are the same as for
2011,” the firm’s CFO said during an investor conference in Warsaw
last week.

Proceeds from the emission will go to
increase the scope of operations and expand the company’s fleet, the
IPO prospectus reads. It also plans a
reconstruction of its main port facilities in Kherson, but would put
a hold on the project should the proceeds from the issue fall short
of expectations, Konstantyn Molodkovets said.

At present, KDM Shipping owns eight
Soviet-era vessels, but has ambitious plans for expansion. According
to its director, the company has already inked a $54 million
deal with Chinese producers for four additional ships.

If successful, KDM
Shipping would become the 11th company on
the Warsaw-based WIG-Ukraine index. Up to now the latter had been
dominated by agribusiness, which makes up 7 of 10 comprising firms.

Polish investors have
repeatedly complained about the lack of diversity. The potential IPO
could be well received by those seeking exposure to other sectors of
the Ukrainian economy, thus boosting chances of a successful
placement.

“If the company is
from a new sector – and we can say that so far no meaningful public
placement from the sector by a Ukrainian company has taken place,
than the company is looked on more favorably by investors,” said
Patiota.

Nonetheless, the IPO comes
as somewhat of a surprise. Despite floating the idea of going public
on several occasions, KDM Shipping’s investor and public relations
activities have been muted compared to previous issues. The hasty
process also raised eyebrows amongst investors, most of whom expected
little to no activity in the coming months.

Moreover, it appears the
company itself was not focused on making a big splash. While a media
campaign ahead of the big decision could have better introduced the
company to individual investors and analysts, this is not the way KDM
Shipping decided to go.

We did not want seek media
attention or run after individual investors, said Magda Kolodzieczyk,
a spokesperson. Instead, she added, we focused on talks with
institutional buyers, and we are quite happy with the results.

But that’s a risky
strategy. Poor communication by Ukrainian companies recently tested
Polish investor’s trust.

“Some investments
[in Ukrainian companies] have disillusioned investors,” Unicredit
analyst Marcin Gatarz recently told Parkiet, a leading Polish
business daily. “Sometimes the poor results were caused by factors
independent of the companies. But sometimes they were caused by a
lack of communication with the capital markets and not fulfilling
promises made during the IPO process.”

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