Moscow Exchange sets $ 4.6 bn IPO target

MOSCOW: Russia's main stock exchange Monday set a valuation target of $ 4.6 billion for a domestic listing aimed at kickstarting stalled Kremlin efforts to build a global powerhouse out of the Moscow bourse.
The Moscow Exchange — formed in a 2011 merger of the MICEX and RTS trading floors — set its February 15 initial public offering price range at 55-63 rubles ($ 1.84-$2.10 / 1.34-1.55 euros) per share.
That put a $ 4.0-$ 4.6 billion (2.9-3.4 billion euros) price tag on Russia's home of both stock and bond as well as derivatives trading — the lower end of the $ 4.5 billion valuation the merged company earned two years ago.
The dip reflects the hardships Russian stocks have suffered from the aversion of emerging market risk that Western investors experienced during the recent global economic downturn.
But analysts warn that the exchange's suggested price-to-earnings ratio of around 15 still made it into a pricey stock that looked overvalued compared with its Western counterparts.
Organizers appeared too keenly aware of this risks as they set an tempting dividend payment of more than 50 percent 2014 the consolidated net profit in order to improve interest in the stock.
"This placing will gauge what Western players think of the Russian market's development prospects," said Nord Capital investment house analyst Roman Tkachuk.
"Their attitude has been pretty negative of late," Tkachuk noted. "The trade volume fell significantly at the end of last year."
The exchange said it hoped to raise more than $ 500 million from the offering so that it could boost the capitalization of its clearing subsidiary and improve its IT infrastructure.
The authorities hope that a successful IPO will help encourage others to forgo financial capitals such as Hong Kong or London and list in Moscow — now home to only a few dominant firms such as Sberbank and Gazprom.
Russian President Vladimir Putin had initially set the goal of turning Moscow into a global financial center rivaling London and New York while still serving as Kremlin chief in 2000-2008.
But those ambitions were dealt a nearly fatal blow by the 2008-2009 global crisis and a subsequent decision by Russian companies to raise funds through public offerings on richer foreign markets.
The Moscow exchange has thus played only a marginal role in the life of not only Russian business but also the country's small investors.
The Vedomosti business daily said only 70,000 private shareholders were registered on the Moscow Exchange at the end of last year.
That figure compared with the 90 million individual investors registered in the United States and the 94 million stockholders reported in China.
The idea of channeling future IPOs through the Moscow bourse has been recently turned by Putin into a patriotic cause aimed at demonstrating Russia's independence from the West.
"Privatization should work toward developing and raising the capitalization of our own stock market — and not to support foreign trading venues," Putin said in remarks quoted by Vedomosti.
Companies such as top state bank VTB have since promised to list shares in Moscow within the course of the year.
Vedomosti said VTB chief Andrei Kostin recently vowed to "make an example" of his finance house by offering between 10 and 25 percent of the bank's stock on the bourse.
The Moscow Exchange has 2.197 billion shares and includes the Central Bank and Sberbank as its two main shareholders.
Neither intends to part with their 23.4-percent and 10.3-percent respective stakes. The shares will be offered by the MICEX exchange and its main subsidiary.
The Moscow Exchange posted a $ 215 million profit in the first nine months of last year.