REFILE-UPDATE 2-Portugal further exceeds selloff target as CTT sets debut premium

Thu Dec 5, 2013 9:14am EST

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* CTT stock up as much as 7 pct vs 5.52 euros sale price

* Company valued at 830 million euros

* Sale takes Portugal privatisation proceeds to 6.9 bln eur

* Tops year-end target of 5.5 billion (Rewrites first paragraph, adds sector comparison, details, background)

By Daniel Alvarenga and Sergio Goncalves

LISBON, Dec 5 (Reuters) - Shares in Portuguese postal service CTT rose as much as 7 percent on their stock market debut on Thursday, marking a successful selloff that helps Lisbon further exceed a privatisation target imposed as part of its international bailout.

The CTT placement - the first flotation on Lisbon's stock exchange since renewable energy company EDPR in 2008 - takes Portugal's proceeds from the sale of state assets to 6.9 billion euros ($9.4 billion), beating its end-2013 target of 5.5 billion.

The sale also sets a positive precedent as Lisbon plans further disposals, which could include the insurance arm of state-owned bank Caixa Geral de Depositos, flag air carrier TAP, the cargo unit of the national railway company Comboios de Portugal and parts of water utility Aguas de Portugal.

Portugal hopes to exit its bailout programme by mid 2014 and the ambitions sale of state assets is part of that project, which has made faster progress than that of Greece for instance where the first major privatisation was only completed in October.

Portugal has already sold stakes in power firms EDP and REN as well as in airport operator ANA and it promised to privatise CTT in its 2011 rescue programme agreed with the European Union and International Monetary Fund.

The oversubscribed sale of a 70 percent stake in CTT, which traces its origins to Portugal's days as a global power in the 16th century, was priced at 5.52 euros per share, the top of a previously indicated range and valuing the company at 830 million euros ($1.1 billion).

Portugal will reap 580 million euros from the sale.

CTT stock was up 4 percent at 5.7 euros by 1220 GMT on heavy turnover of 168 million euros, a similar rise to that seen in Belgium's bpost flotation in June, but lagging the near 40 percent premium set in the October flotation of Britain's Royal Mail.

The latter deal has left the UK government facing accusations it was underpriced.

STOCK WITH POTENTIAL

Analysts noted CTT's strength came despite declining postage volumes and CTT's dependence on the Portuguese market.

"The attractive part (of CTT) is the dividend and the possibility of setting up a postal bank ... I think the stock has potential," said Gualter Pacheco, a broker at Go Bulling in Porto, referring to a recent approval to expand in financial services.

Joao Cabecana, analyst at Banco Big in Lisbon, also noted CTT was more appealing than its peers in terms of its dividend yield, at 7 percent on the basis of its market price against a 3.5 percent average for the European postal sector as a whole.

However, it is valued at a slight premium in terms of its forecast price-to-earnings ratio of 10.44 times and 15.8 times enterprise value-to-EBITDA ratio, against peers' average of 7.95 times and 14.7 times respectively.

CTT has one of the largest retail networks in Portugal, with 2,500 branches and 4,000 corner shop partnerships where bills can be paid as well as stamps purchased.

Financial services currently make up 8 percent, or 58 million euros, of CTT's sales and last month the Bank of Portugal authorised it to set up a postal bank if future shareholders opt to do so.

Portugal's economy minister had said on Wednesday the privatisation beat expectations by attracting foreign investors, who bought around 43 percent of the capital in the offering.

The names of institutional investors who bought relevant stakes in CTT will be revealed later.

Domestic investors snapped up more than 26 percent of the capital, while state property holding Parpublica retains 30 percent. ($1 = 0.7377 euros) (Editing by Tom Pfeiffer and David Holmes)

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