14 Oct 2009 17:49

Synergy SPO well-timed, interest to be strong

MOSCOW. Oct 14 (Interfax) - Russian alcohol producer Synergy's SPO is well-timed and investor interest ought to be strong, analysts say.

"Judging by the H1 earnings report, 80% of the debt is short-term so the placement will raise funds to go towards refinancing this," KIT Finance analyst Natalya Kolupayeva told Interfax.

Synergy's overall debt is 7 billion rubles, Kolupayeva said.

Zerich Capital Management analyst Oleg Dushin said the company was holding an SPO so as not to avoid having to jostle on the bond market.

KIT Finance's Kolupayeva said the asking price of $19-$21 a share was "quite normal." "There's a discount too - the shares were higher when the SPO was announced. It's quite normal for a company to offer its shares at a discount to make them more appealing to investors," she said.

"The placement will probably be a success - there is demand for the shares," she said. "Investors are getting long money and they are now ready to buy well-known brands," she said.

The shares will appeal to a wide range of investors, above all funds, she said.

Bank of Moscow analyst Sabina Mukhamedzhanova said she thought Synergy might be preparing for an M&A deal as many companies from the sector are in financial difficulty. She recommends that investors buy the SPO.

Synergy is one of the least expensive buys in its sector in Russia or abroad - the discount based on EV/EBITDA 09 is 30%-50%, the analyst said.

The company's target price is $27.45 at present. "The new target on a diluted basis might be $25.5-$26," Mukhamedzhanova said.

In addition, she said the government and parliament were discussing ways to clamp down on illegal alcohol trade, and "legal producers stand to benefit because the minimum price for vodka is likely to erode the shadow sector's share of the market."

Zerich's Dushin said he thought the Synergy shares would sell for "$20, give or take a dollar." "Investors will demand a discount due to the company's low liquidity, he said. The SPO might raise $70 million-$80 million, he said.

The timing is right. "Interest in shares is booming, and rivals could emerge," he said.

Synergy plans to close the bid book on sale of 25% of shares on Thursday, with pricing expected the same day.

Renaissance Capital and VTB Capital are the joint placement organizers.

The bid book was opened on Tuesday, October 6. The placement volume will total $80 million.

Synergy officially announced that it might increase charter capital by placing supplementary shares late last week.

Synergy conducted an IPO on the RTS and MICEX exchanges in November 2007, raising $190 million by placing 2.72 million shares at $70 each.

Synergy produces liquor at seven distilleries in five federal districts, including Ussuriisky Balzam, Khabarovsky, Uralalko in Perm, Alviz in Arkhangelsk and ROOM in Nizhny Novgorod.

Synergy posted a net profit of 512 million rubles in the first half of 2009 under IFRS, 9.6% less than in the same period last year. Revenue increased 8% to 7.78 billion rubles. EBITDA was up 29% to 1.4 billion rubles.