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Old 27th Apr 2011, 04:20
  #48 (permalink)  
Savoia
 
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Russian Helicopters to Float


Vladimir Putin has agreed to the floatation of Russian helicopters

Russian Helicopters, Russia’s dominant helicopter maker, has set the price range for its $500m equity offering as the state-owned company moves closer to welcoming outside investors – and securing some badly-needed cash.

As it edges towards next month’s planned London-Moscow IPO, the group will be learning the lessons from the seven Russian companies that have attempted a London listing this year. Only three succeeded. Russian Helicopters will keep a careful eye on pricing as it tried to become the fourth.

The company is on a mission to modernise its equipment, facilities and products as part of an ambitious Rb20 trillion (about $700bn) state armament programme designed to thrust Russia’s outdated military sector into the 21st century.

According to the company, the share of modern equipment at its plants stands at just 10 per cent, and analysts say Russian Helicopters has a way to go before both its equipment and capacity are back to Soviet-era standards: the group produces under 200 helicopters a year, versus up to 950 per year in the late 1970s.

New capital – and input from a new group of outside investors – could be the state’s first step towards modernising the company and helping it flex its muscles against western competitors including Eurocopter, Sikorsky, Bell and AgustaWestland.

But it still remains to be seen who exactly will be investing in the group’s IPO, given the mixed track record of Russian IPOs in London this year.
The three to secure London listings were Nomos Bank, pork and sugar producer Rusagro, and pipe maker HMS, all of three of which were noted for their discounted valuations in comparison with their listed peers.

Russian Helicopters may be following their example. The company is targeting a total valuation of $1.8bn – $2.4bn, which implies that, if priced at mid-range, the shares would be relatively cheap at just 4.6 times earnings before interest, tax, depreciation and amortisation.

But many emerging market funds could be restricted from buying aerospace or defence stocks and unable to take part in the offering, while investors from the traditional defence space could be turned off by some characteristics specific to the Russian industry.

Moreover, Like many other defence contractors, Russian Helicopters is dependent on one big customer – in this case the Russian state. The state armament programme is the fourth of its kind, yet none of the three preceding programmes jave met their targets, and analysts lament that the industry has a history of missing deadlines.

For Russian Helicopters to bring its volume of production back to Soviet-era levels, it will need a significant boost in capital expenditure both from the state and foreign investors – followed by a steady stream of orders.

The question is whether the investors will be ready to bet that such contracts will be forthcoming. Even at 4.6 times earnings.
Russian Helicopters: flying low | beyondbrics | News and views on emerging markets from the Financial Times
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