Why Europlan’s initial public offering attracts institutional investors

The day before the closing, the book of applications for the Europlan IPO was oversubscribed four times. Portfolio managers are attracted to the company’s strong financial position and discount to initial price targets. However, in the future the company will have to face increased competition from subsidiaries of large banks.

Four Kommersant sources in the financial market said that as of March 27, the book of applications for the Europlan IPO was oversubscribed four times at the upper limit of the price range of 835–875 rubles. “The collection of applications proceeded quite briskly; by the end of the first day, the book was completely covered, and by the close of Tuesday it was oversubscribed by more than three times,” notes Kommersant’s interlocutor at the market. According to another Kommersant source involved in the placement, the organizers are targeting investors with “five books.”

Taking into account multiple oversubscriptions, the placement will cost 875 rubles. for the paper, Kommersant’s interlocutors are sure. This corresponds to Europlan’s capitalization of 105 billion rubles. Since the company’s sole shareholder, the investment holding SSFai, is selling up to 15 million shares, the placement volume will exceed 13 billion rubles. According to this indicator, it may not only be the largest since the beginning of the year, but also enter the top three in 2021. The placements completed this year were significantly smaller – “Carsharing Russia” (4.2 billion rubles), “Diasoft” (4.14 billion rubles), “Alcohol group “Crystal”” (1.15 billion rubles). Last year, Sovcombank attracted 11.5 billion rubles, Eurotrans – 13.5 billion rubles.

Institutional investors are showing increased interest in the shares of the leasing company. Four portfolio managers told Kommersant that they plan to participate in the placement and some of them have already submitted applications. Another portfolio manager noted that he was considering participation.

Europlan is a major independent player in the car leasing market with high financial performance. Director of Client Relations at BCS World of Investments Andrey Petrov notes high ROE (35–40%), interest margins are higher than those of the banking sector, almost zero cost of risk due to the liquidity of property and its high residual value, as well as high market growth rates in the coming years (by 15% on average). “Europlan is distinguished by high capital adequacy, which allows it to pay generous dividends,” adds Mikhail Nesterov, head of the analytical department of TKB Investment Partners.

The issuer is interesting from the point of view of the discount it gives to IPO participants in comparison with the initial valuation, notes FG Finam analyst Leonid Delitsyn. According to him, in February the company was valued at 140 billion rubles. “At meetings, shareholders talked about valuations at 10 P/E, which is prohibitively expensive for such a company. The current 5 P/E is already interesting to participate in,” notes one of the portfolio managers.

Shares of the parent SFA react positively to the progress of the Europlan IPO. According to the results of trading on Wednesday, they rose in price by almost 10%, to 1950.2 rubles, more than doubling in a month and a half. As Daniil Bolotskikh, leading analyst at Digital Broker, notes, acquiring the public status of Europlan will help reveal the internal value of the company, which has a positive effect on the value of SSFai.

However, some experts believe that the discount could have been greater in the Europlan IPO. According to Alexander Golovtsov, head of investment research at Era Investment Management Company, Europlan’s valuation is “a little too high compared, for example, to such a fast-growing sector player as TKS Holding, since, unlike it, the company is losing market share.” . Indeed, over the past two years, Europlan has dropped from third to fifth position in the Russian Federation. The expert admits that in the future “the trend may intensify due to competition from subsidiaries of leasing companies of the largest banks.”

At the same time, Alexander Golovtsov clarifies, after the start of trading, shares may rise in price by 20–30% due to large oversubscription and a shortage of new ideas on the market. The practice of recent placements with high oversubscription, adds Mikhail Nesterov, shows that “securities can behave very volatile in the first days of trading, especially in IPOs with high participation of retail clients.”

Vitaly Gaidaev