Royal Mail worth 82% more than government's valuation

[TrueBlueTerrier]

Royal Mail worth 82% more than government's valuation, analyst claims

http://www.theguardian.com/uk-news/2013 ... on-analyst" onclick="window.open(this.href);return false;

Shares in the privatised postal service could be worth 599p – a hefty premium on the likely 330p flotation price

Royal Mail could be worth as much as £6bn, almost double the government's maximum valuation, according to a City analyst.

The valuation by stockbroker Canaccord Genuity was the second to say the government had seriously undervalued Royal Mail, potentially shortchanging taxpayers by more than £1bn. It came as ministers held an emergency meeting to decide how to share out Royal Mail's shares following overwhelming demand from the public, City investors and pension funds. It is understood David Cameron will make a final decision on Thursday afternoon.

Canaccord said it believed the government could have sold Royal Mail shares at 599p, 269p more than the shares will be sold at when the company floats on the stock market on Friday morning.

Canaccord told its clients that its valuation "implies an 82% upside" on the 330p the government is expected to sell shares for. If Canaccord is correct in its valuation – which is based on the cashflow model Quest, which was developed by City expert Terry Smith – it means the government may have missed out on the extra £1.6bn it could have raised for taxpayers if it had sold the shares at 600p.

The Canaccord valuation came after rival stockbroker Panmure Gordon said the government had undervalued Royal Mail by "more than £1bn". Gert Zonneveld, Panmure's managing director, said the government should have valued the company at up to £4.5bn.

Panmure and Canaccord are the only two brokers to have published research as most of the others are involved in the sale and prevented from talking about the valuation.

Vince Cable, the business secretary, said he was confident the shares had been "priced in the right place". He said that Panmure Gordon's £4.5bn valuation was "way outside the estimates of most of the equity analysts".

Lord Forsyth, a former Tory cabinet minister, told the BBC's Daily Politics on Thursday that "clearly the pricing has been wrong".

Traders at IG Index expected Royal Mail's shares to spike to between 395p and 415p on Friday. A rise to 400p would be a near-instant 21% paper return.

In a note titled "A royal return on your money", Canaccord said: "We think there will be lots of happy shareholders with a minimum subscription come the 11th of October, but how many of them will be in it for the long-term? With unions being bought off and the UK economy recovering, and given the massive upside, the smart money will do well to hoover them up."

Canaccord said Royal Mail could be worth as much as £10bn by 2015 if the company was able to cut 3% of its 150,000 workforce and increase sales by 3%.

"But, the real interest is what if the company could reduce people costs? The operating gearing is massive," it said in the note.

Royal Mail has warned that it will cut an unspecified number of jobs in the next few years. It has already axed 50,000 jobs over the past decade.

More than 700,000 people have applied for shares in Royal Mail, reviving the privatisation fever last seen in the 1980s.

Cable said the public had placed orders for more than seven times the number of shares available to them. Small investors could have bought the entire company if 70% of the shares on sale had not been reserved for City investors and pension funds.

The huge demand means that applications are bound to be scaled back. Those applying for the minimum £750 of shares may be the only ones to get what they have applied for while those who applied for shares worth thousands are expected to get just a fraction of what they wanted.

The BBC's business editor, Robert Peston, suggested that those who applied for more than £10,000 worth – the maximum allowed via orders direct from the government – may not collect any shares at all.

It was also rumoured that the government may increase the proportion of shares allocated to the public from 30% to 33%, cutting the proportion available to City investors from 70% to 67%.

The government refused to comment on the speculation saying that "no decision has been made".

Michael Fallon, the business minister in charge of the sale, has said he is committed to making sure small investors "get their fair share" of Royal Mail shares. The Guardian has previously reported that the government will increase the proportion available to the public.

On top of the massive public demand, hedge funds and other institutional investors are understood to have placed orders for more than £30bn of the shares.

Cable said institutional demand was so strong that the government would be able to block shares from going to "spivs and speculators" in favour of "responsible long-term institutional investors".

"We are in a position to ensure we do get the right type of investor community – pension funds, insurance companies that hold the savings of millions of people," he said. "That's the type of community we want."

Cable said demand from institutional investors at the maximum 330p was so strong that hedge funds and other speculators "in it to make a killing" were unlikely to end up with any shares in the flotation. "The aim is to place the shares with long-term investors; we are absolutely confident that will happen."

[edwardo]

just been reading the posts on privatisation . and I though RM managers were thick seems MPs are running them close what a mess

[pants123]

Canaccord said Royal Mail could be worth as much as £10bn by 2015 if the company was able to cut 3% of its 150,000 workforce and increase sales by 3%.

HERE WE GO, IT'S NOT EVEN BEEN SOLD YET BUT THEY ARE TALKING OF CUTTING THE WORK FORCE ALREADY..

WHAT A JOKE, WORKING IMPOSSIBLE WORK LOADS NOW... THESE CLOWN NEED A REALITY CHECK,, GET THEM TO TRY A GOD DAMN DELIVERY..

[Pinky 1]

Canaccord said Royal Mail could be worth as much as £10bn by 2015 if the company was able to cut 3% of its 150,000 workforce and increase sales by 3%.

HERE WE GO, IT'S NOT EVEN BEEN SOLD YET BUT THEY ARE TALKING OF CUTTING THE WORK FORCE ALREADY..

WHAT A JOKE, WORKING IMPOSSIBLE WORK LOADS NOW... THESE CLOWN NEED A REALITY CHECK,, GET THEM TO TRY A GOD DAMN DELIVERY..

I think you've answered your own question there ......
The 3% cut in the workforce couldn't come from deliveries, we can't complete 100% with the people we've got now

[cloherty1976]

Could be worth 10billion in a few years wow I thought it was going to be worthless in 3!

[silly suffolk]

vince cable = national treasure.

[TrueBlueTerrier]

vince cable = national treasure.

I agree - and with treasure you dig a hole and bury it for a few decades - I like your plan.

[UnhappyGremlin]

vince cable = national treasure.

I agree - and with treasure you dig a hole and bury it for a few decades - I like your plan.

Are we allowed to urinate on the burial site?

[chooch]

from http://www.theguardian.com/uk-news/2013 ... unced-live" onclick="window.open(this.href);return false; tweet-feed

Panmure Gordon, having been the first broker to say the Royal Mail was worth more than the sale price, keeps chipping away at Vince Cable:

PanmureSavvas @PanmureSavvas
Allocation of only £750 Royal Mail stock inefficient as the cost to sell shares will be a big proportion of any gains. Mastermind by Cable.

[chooch]

I'm getting the feeling from 'my Contacts' that we need to put our £2K allocation on the back-burner
(we should be given the option to 'reinvest' our dividends by 'buying' more shares apparently(?))
and make sure we don't 'lose them' by doing something stupid..
and think of them as "the something good that came out of our time at RM/Consignia "or whatever they'll be calling it by then as you pass them on to your children..

[Darren Bent]

then 666 shares X 599p = £3989.34 and if it go up.

so it could be big money for us eventually but how can we remove 3 year qualifying period.

[chooch]

the 3 years is there to protect us from ourselves Darren - no really, it's 'The Law' and it won't change..

[k979aaa]

vince cable = national treasure.

I agree - and with treasure you dig a hole and bury it for a few decades - I like your plan.

Are we allowed to urinate on the burial site?

I will put a big deposit down if I get their first.

[UnhappyGremlin]

vince cable = national treasure.

I agree - and with treasure you dig a hole and bury it for a few decades - I like your plan.

Are we allowed to urinate on the burial site?

I will put a big deposit down if I get their first.

Race you.

[barbario]

vince cable = national treasure.

Don't worry about Vince Cable,he is very relaxed about it all.