RUSSIA: Dixy slashes IPO range
Dixy Retail has dropped the price range for its planned initial public offering due to concerns that the original target price overvalued the company.
According to Moscow-based investment firm UralSib Financial Corporation, the company had been overvalued compared to its Russian retail peers because it failed to offer "particularly strong top-line growth or attractive margins".
The group, Russia's third largest food retailer by sales, is also Russia's least profitable publicly traded food retailer. Last year, Dixy generated income of US$9m on the back of revenue of $1.01bn, giving margins of under 1%. Of all Russia's publicly traded companies, Dixy has the highest debt, posting debt/EBITDA ratio of 4.0 in 2006.
These factors, coupled with management's failure to prove it has the ability to turn around the company's performance, caused UralSib to suggest that the group should trade at a 10% discount when compared publicly traded Russian food retailers X5, Seventh Continent and Magnit.
"We believe Dixy deserves to be valued at least at a 10% discount (based on 2008E P/E and EV/EBITDA multiples) to its Russian peers. We estimate Dixy's fair value at $900.6m, and recommend bidding $15/share at the IPO," the brokerage wrote in a not to investors earlier this week.
Dixy has since cut its price range from $16.50-$22 per share to $14.40-15.80 per share.
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