Royal Mail Privatisation: Shares 'May Reach 450p' in IPO

[TrueBlueTerrier]

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Royal Mail shares may reach up to 450p when the state-owned company floats on the London Stock Exchange, according to Panmure Gordon.

The stockbroker estimated the organisation to be worth between £3.7bn ($5.9bn, €4.3bn) and £4.5bn, £1bn higher than its current official valuation of between £2.6bn and £3.3bn.

Panmure Gordon analysed the postal service against its international counterparts, including Deutsche Post, Singapore Pore, Post NL, BPost and Osterreichische Post, and found that all companies trade at more than ten times of their prospective earnings [Fig 1].


Fig 1 (Panmure Gordon graph: Earnings multiples)
The firm also argued that the company will post a healthy dividend yield of between 4.5% and 5.5%, which implies an equity value of £3.6bn to £4.4bn.

Panmure Gordon's report concluded that its valuation was realistic, but it may be impacted by share price sentiment, such as national strike action.

Additionally, over the medium term, there is substantial potential for Royal Mail to significantly improve earnings and cash flows (and therefore dividend payments), according to the stockbroker.

Gert Zonneveld, co-head of research at Panmure Gordon, said he was not deterred by the decline in volume of letters which could compromise the company's earnings.

"OfCom has changed the way that Royal Mail can charge for its products," he explained.

"The organisation has significant freedom to price their products the way it believes makes commercial sense, so even if we are going to see a fall in letters Royal Mail can change its cost base or change its pricing."

Strike Vote

The Communication Workers Union has said that it is to press ahead with its strike ballot as the government prepares to float the Royal Mail.

"Royal Mail is profitable and can continue to be successful in the public sector. The sale is driven by political dogma, not economic necessity, and postal workers and the CWU will continue to fight to save services as well as defend their terms and conditions," Billy Hayes, CWU general secretary, argued.

The ballot closes on 16 October with the result announced the same day and the earliest strike could take place on 23 October, according to the trade union.

[UnhappyGremlin]

Even if it does, hopefully a strike would wipe a couple of quid off each share.

[Nigel1505]

Even if it does, hopefully a strike would wipe a couple of quid off each share.

Stay happy \I take it you have opted out of receiving free shares.

[fishtank]

Even if it does, hopefully a strike would wipe a couple of quid off each share.

Stay happy \I take it you have opted out of receiving free shares.

It wouldn't really matter if he has or hasn't.
Since it will be at least three or more likely five years before we can touch them what happens in the next six weeks or even six months will have no bearing on the share price when or if we ever get to collect anything.

[barrowc]

Gert Zonneveld, co-head of research at Panmure Gordon, said ... "so even if we are going to see a fall in letters Royal Mail can change its cost base or change its pricing."

By "cost base", I think he means us

[UnhappyGremlin]

Gert Zonneveld, co-head of research at Panmure Gordon, said ... "so even if we are going to see a fall in letters Royal Mail can change its cost base or change its pricing."

By "cost base", I think he means us

Which means cuts in pay, or staff numbers.
Or, more likely, both.

[DavidUK]

Even if it does, hopefully a strike would wipe a couple of quid off each share.

Which would clearly present an ideal buying opportunity on the basis that the price would rise once the dispute is eventually settled.

[UnhappyGremlin]

Even if it does, hopefully a strike would wipe a couple of quid off each share.

Which would clearly present an ideal buying opportunity on the basis that the price would rise once the dispute is eventually settled.

Maybe so. But maybe not.

Plus those that have bought prior to that would lose value on the shares they own, and may decide to keep them to wait until the value goes up again to recover their initial investment.

[RTP]

Daily Mails going to have a field day when they put up the number of staff who are buying these shares.

[Godric]

and then they are going to start to plummet every time Tnt start deliveries in a new city ..... just watch the shares go down when they start deliverying in Manchester next month