CCoP approves 2.5% PPL’s secondary public offering – Alfalah Securities Limited

Karachi: The Cabinet Committee on Privatisation (CCoP) has approved the sale of 2.5% of governments’ shareholding in Pakistan Petroleum Limited (PPL).

According to Alfalah Securities Limited, the Finance Minister has been authorized to determine the strike price through book building process or to decide the strike price through consultation. The Privatization Commission had proposed the sale of 2.5% of the government shareholding of the PPL through secondary public offering where it was decided the transaction structure would include that the 50% of the 2.5% government’s share to be offered to local and foreign institutions as well as high net worth individuals through book building, 25% to be offered to foreign investors through preferential allocation and 25% to be offered to general public through a public subscription. The Privatization Commission of Pakistan is set to place for 23 million shares of which are 2.5% of the 70.66% holding of GoP in PPL. It would be the first major equity placement after the current government has taken over and it would help direct major Forex inflows into the country.

At current price, the Govt. is expected to fetch USD 45 million from the secondary placement. Alfalah Securities Limited recommends a BUY on the stock as the stock trades at 6.5x FY2012E, yielding 8% and offering an upside potential of 39% to Alfalah Securities Limited’s fair value of PKR 246. However, investors are recommended to buy the stock through placement or when the placement period approaches so as to absorb any price shocks due to an increase in shares float.