Lalpir Power: Market depth to digest OFS looks strong

We expect favorable investor appetite for upcoming listing of Lalpir Power where a high payout policy translating into prospective D/Y of 18-20% (at the floor price) barring a dip in 2014E, should be the key selling point.

From a total offer of 37.9mn shares, 28.5mn shares are targeted to HNWI’s via book building process and the remainder (9.5mn shares) for public subscription.

Key investment considerations show fuel losses (10-12gms/kWh) as the prime irritant, even as the company aims to mitigate these through efficiency upgrade projects. Cumulatively these measures are expected to allow Lalpir to save ~4.7gms/kWh and push thermal efficiency to ~37.5% by 2015E.

Sensitivities suggest 4-6% EPS upside from incremental 1% deval in PkR/US$ parity while exposure to inter-corporate debt is nominally negative for earnings. 

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Via: KASB Securities and Economics Research