November 15 (SeeNews) - The Ljubljana Stock Exchange's (LJSE) first initial public offering (IPO) in eight years, of Slovenia’s second-largest bank by assets, Nova Kreditna Banka Maribor (NKBM), is expected to attract investors hungry for new listings and stimulate the stagnating bourse, analysts say.
Not only has the bourse been starved of IPOs, which attract investors eager for quick returns, but there has also been a trend for LJSE companies to delist recently following consolidation of their ownership. Slovenia, which joined the European Union in 2004 and the eurozone at the beginning of 2007, set up the bourse in 1989. Analysts have said the LJSE urgently needs new companies and tie-ups with other bourses to grab investors’ interest and stay afloat.
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Last week the country’s Finance Ministry said it plans to launch the IPO of NKBM on November 19 and to offer up to 49% of NKBM’s shares to institutional and individual investors. The IPO is planned to be completed by November 29 and after that NKBM shares will be listed on the LJSE. The government plans to keep at least 41.4% of the bank after the IPO. It now owns 100% of NKBM directly and indirectly through state-run investment funds SOD and KAD.
“The listing of the first large bank will importantly contribute to the development of the Slovenian capital market as there is no large bank or insurer among the issuers of shares on the market,” the LJSE told SeeNews in a statement.
“The representation and the importance of the capital market for the operation of the Slovenian economy will rise,” it added.
LJSE said that NKBM can be gradually listed on its top tier where the turnover is higher. LJSE set up this tier in 2005 aiming to attract foreign investors. The companies listed on the prime tier must meet special requirements on transparency, accounting and liquidity of their stocks.
The current top-tier stocks are household appliance producer Gorenje, shipping company Intereuropa, drug maker Krka, the country's top food retailer Mercator, the largest hardware goods retailer Merkur, the largest fuel trader Petrol, port operator Luka Koper and Telekom Slovenije.
Such liquid shares are especially interesting for LJSE as they are the basis for the market's long-term development, it said.
Analysts expect the IPO be successful and attract both individual and institutional investors.
“Our market simply needs new companies, where investors can invest their money. That’s why I expect this first IPO to be carried out successfully and for the market to be more diversified and for trading to be more dynamic in the future,” Bine Pangrsic, an analyst with local brokerage house Medvesek Pusnik, told SeeNews:
Pangrsic said that most probably there will be strong interest in the IPO but it depends a lot on the way it is managed and what will be the final price. “If it is in the ranges in which it is expected, probably the interest will be quite high, ” he added.
The Finance Ministry has yet to publish the prospectus of the IPO and the price of the shares.
“There is little information announced publicly [...] I think that the IPO will be successful, regardless of this,” Matej Tomazin from investment company DZU Alfa Invest told SeeNews. He added that it will be positive for the further development of the Slovenian capital market.
Tomazin said that institutional investors’ interest is high but added that: “Having in mind that now the banking market is under the pressure of the mortgage crisis, which goes on in the western countries, it (the interest) is expected to be a bit limited.” .
Problems in the U.S. subprime mortgage markets and rising defaults among less creditworthy borrowers were the trigger for the recent global credit difficulties and worries about financial stability.
Andraz Vrh, asset manager with Ilirika brokerage house, expects high interest in the IPO but not a flood of investors. Individuals who have more experience in buying shares on the bourse will subscribe for the shares but individuals who have no such experience will not, he said.
Analysts expect a fall on the market as investors sell shares to raise cash for the IPO but they say the fall will not be significant.
Slovenian stock indices fell for a seventh day running on Thursday. The broader 15-share SBI20 index lost 0.89 % to 10,787.45 points. The blue-chip index SBITOP went down 0.58% to 2,365.90 points. However, analysts say the main reason for the fall is uncertainty on the market after the announcement of Prime Minister Janez Jansa that he had not ruled out the possibility of his centre-right cabinet resigning after Danilo Turk, supported by centre-left parties, won Sunday’s run-off vote for president of the Alpine country.
"NKBM influences to a lesser degree than the current political situation," Ilirika's Vrh said.
NKBM has reported a group net profit of 10.884 billion tolars ($60 million/45 million euro) for last year, little changed from 10.862 billion tolars in 2005. Group assets reached 1.020 trillion tolars at the end of 2006, up 21% from a year earlier. Slovenia switched to the euro from its tolar currency on January 1 at a conversion rate of 239.64 tolars per euro.
NKBM has a market share of around 10% in Slovenia. Twenty-one banks operate in the country of two million people.