A Precision Air plane. Precision Air’s IPO price of 475 Tanzania shillings per share (Sh28) gives the stock a higher valuation than all other counters listed at the Nairobi Stock Exchange, except that of Kenya Orchads. File
Precision Air’s IPO price of 475 Tanzania shillings per share (Sh28) gives the stock a higher valuation than all other counters listed at the Nairobi Stock Exchange, except that of Kenya Orchads.
The initial public offering (IPO) cost puts the airline’s price to earnings (P/E) ratio at 50, above that of all NSE stocks except Kenya Orchads’, whose P/E stands at 75. A high P/E ratio denotes a stock that has a high future growth potential, or one that is over-priced.
According to an analysis by Tanzania Securities Ltd, the price was based on the earnings potential and the historical performance of the firm. The Tanzanian airline, in which Kenya Airways own 49 per cent, opens its IPO on 7 and closes on 28 October.
Foreign investors, including Kenyans, will get an allocation of 49 per cent of shares on sale. Precision Air will be selling 58,841,750 shares targeting TSh27.9 billion. If all the shares are taken up in the IPO, the airline’s total issued shares rise to about TSh194 million.
The report noted that Tanzania’s tourism industry is booming while its mining industry is flourishing.
“Industry forecasts show Tanzania’s mineral industry particularly gold mining is likely to grow in the near future,” said the brokerage report.
The announcement of the offer results will be on November 11, while the crediting of the shares into the individual CDS accounts will be on November 25. Trading will start on December 8 this year.
The money will be used to modernise the airline’s ageing fleet as well as buying additional planes. It targets to have 17 planes within the next two years and 20 planes by 2015.
Kenyan investor
Last week, Precision Air Group managing director Alfonse Kioko said Kenyan investors would be allowed to invest in the firm. The firm said yesterday it had set aside 49 per cent of IPO shares for foreign investors. The IPO will be a gain for Kenyan investors who have shown interest in entering regional stock markets but have faced entry barriers to the Dar es Salaam bourse.
A Tanzanian businessman Michael Shirima owns the airline with 51 per cent stake against Kenya Airways’ 49 per cent share.
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