Hamburg port stock quoted near top of IPO range

FRANKFURT, Oct 26 (Reuters) - Hamburg port operator HHLA’s shares were quoted near the top of its initial public offering (IPO) bookbuilding range in grey market dealings on Friday.

HHLA, which runs the world’s eighth-biggest container port, announced a bookbuilding range of 43-53 euros each for the up to 22 million shares on offer in its IPO, which is competing for investor attention with that of Dubai port operator DP World.

At 1300 GMT, grey market bid quotes for HHLA stood at 52.50 euros and ask quotes at 54.50 euros, according to German brokerages SCHNIGGE01LSD02. Grey market prices suggest what prospective investors are willing to pay for IPO shares.

“There’s interest in the stock,” said Niklas Breckling, a dealer at DKM Wertpapierhandelsbank, which specialises in grey market trading.

“We are receiving a lot of requests, everyone wants to meet the (HHLA) management,” an investment banker close to the IPO told Reuters, speaking on condition of anonymity.

At the indicated bid price of 52.50 euros per share and assuming all stock on offer is sold, HHLA’s IPO would raise 1.16 billion euros ($1.67 billion).

As the current owner, the city-state of Hamburg, is aiming to sell 30 percent of the company in the IPO, HHLA's market value could be in the region of 3.8 billion euros -- a figure broadly in line with recent assessments by analysts at JPMorgan JPM.N and Citigroup C.N, the IPO lead managers.

That is a far cry below the estimated $19-20 billion market value of DP World, whose IPO opens on Nov. 4 with an indicative price range. The sale of existing DP World shares closes on Nov. 15. Dubai plans to offer at least 20 percent of DP World.

HHLA’s IPO is due to be priced on Nov. 1 and the debut on the Frankfurt stock exchange is scheduled for the next day.

HHLA reported a net profit of 79.3 million euros in the first half of 2007. Assuming a similar second-half net profit, a free float of 30 percent and an issue price of 52.50 euros per share, as indicated in the grey market, the stock would be priced at approximately 24 times 2007 earnings per share.

That represents a steep discount to listed port operators such as Britain's Forth Ports FPT.L, which is valued at a 2007 price-to-earnings ratio (P/E) of 38, China Merchants Holdings (International) Co Ltd 0144.HK with a 2007 P/E of 37 or Shanghai International Port (Group) Co 600018.SS at 58 times prospective 2007 earnings, according to Reuters Estimates.

Using the same assumptions for HHLA combined with the company’s stated dividend pay-out target of 50-70 percent of net profit, HHLA’s dividend yield at the midpoint of that pay-out range would be around 2.5 percent.

That would be roughly on a par with the prospective dividend yield of Forth Ports but distinctly higher than for China Merchants and Shanghai International, based on the median of 2007 dividend forecasts in Reuters Estimates.