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Zain Iraq's share price rises in thin trade on Baghdad debut
DUBAI, June 23 (Reuters) - Shares in Zain Iraq surged on their Baghdad bourse debut on Tuesday, in thin trading of the stock, theoretically giving the country's biggest telecoms operator a bigger market value than its majority owner.
Zain Iraq's share price rose by around 50 percent from the opening price to close at 5.99 dinars after 31 million shares - less than 0.002 percent of the company - changed hands. This gave the entire firm a market value of about 10.96 trillion Iraqi dinars ($9.4 billion).
Kuwait's Zain, majority shareholder in Zain Iraq, has a market capitalisation of $6.1 billion.
"The people who bought today will soon realise they bought a subsidiary worth more than the parent and the price will steadily go down," said Hassan Aldahan, chairman of Baghdad investment company Bain Alnahrain.
In 2011, Nomura estimated Zain Iraq's enterprise value - the value of its equity and debt combined - at $4.9 billion.
Since then, the company's earnings and network have deteriorated due to stiffening competition and Islamic State's seizure of much of the country. Its annual net profit was $348 million in 2011 versus $256 million last year.
Aldahan said the seemingly inflated valuation was partly because Zain Iraq had not released audited financial statements which investors could use to judge its "actual worth".
Investors could obtain its revenue and profit from parent Zain's earnings statement, while broker Rabee Securities published a note on Zain Iraq this week.
FLOTATION
Zain Iraq and rivals Asiacell and Korek were required to float a quarter of their shares and join the Iraq Stock Exchange (ISX) by August 2011 as per the terms of their 15-year mobile licences awarded in 2007.
Asiacell, majority-owned by Qatar's Ooredoo, used a book-building method to float in 2013, raising $1.35 billion in which its parent was a major subscriber.
But Zain Iraq - almost four years after the 2011 deadline - listed on the ISX on Tuesday with no prior share sale apart from a token initial public offering in 2013 that sold 55.9 million shares at 1 dinar each, as required to become a joint stock company.
It has 1.83 trillion outstanding shares, so must offer at least 457 billion shares for sale on the ISX - it traded a small fraction of those, 31 million, on Tuesday.
Asiacell closed at 8.25 dinars on Tuesday, down 63 percent from 2013's IPO price of 22 dinars.
"It seems people looked at Asiacell's share price and thought Zain Iraq should be worth something similar, but that totally ignores the differing amounts of shares issued in each company," added Aldahan.
"There was very little trading. The whole objective of the requirement to go public was to get Iraqis interested in share ownership - the process Zain Iraq has undergone really regresses the stock exchange."
Zain Iraq said it was happy to have complied with its licence terms and looked "forward to the participation of the investment community in one of the most profitable and resilient companies in Iraq".
($1 = 1,162.0000 Iraqi dinars) (Reporting by Matt Smith; Editing by Pravin Char)
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DUBAI, June 23 (Reuters) - Shares in Zain Iraq surged on their Baghdad bourse debut on Tuesday, in thin trading of the stock, theoretically giving the country's biggest telecoms operator a bigger market value than its majority owner.
Zain Iraq's share price rose by around 50 percent from the opening price to close at 5.99 dinars after 31 million shares - less than 0.002 percent of the company - changed hands. This gave the entire firm a market value of about 10.96 trillion Iraqi dinars ($9.4 billion).
Kuwait's Zain, majority shareholder in Zain Iraq, has a market capitalisation of $6.1 billion.
"The people who bought today will soon realise they bought a subsidiary worth more than the parent and the price will steadily go down," said Hassan Aldahan, chairman of Baghdad investment company Bain Alnahrain.
In 2011, Nomura estimated Zain Iraq's enterprise value - the value of its equity and debt combined - at $4.9 billion.
Since then, the company's earnings and network have deteriorated due to stiffening competition and Islamic State's seizure of much of the country. Its annual net profit was $348 million in 2011 versus $256 million last year.
Aldahan said the seemingly inflated valuation was partly because Zain Iraq had not released audited financial statements which investors could use to judge its "actual worth".
Investors could obtain its revenue and profit from parent Zain's earnings statement, while broker Rabee Securities published a note on Zain Iraq this week.
FLOTATION
Zain Iraq and rivals Asiacell and Korek were required to float a quarter of their shares and join the Iraq Stock Exchange (ISX) by August 2011 as per the terms of their 15-year mobile licences awarded in 2007.
Asiacell, majority-owned by Qatar's Ooredoo, used a book-building method to float in 2013, raising $1.35 billion in which its parent was a major subscriber.
But Zain Iraq - almost four years after the 2011 deadline - listed on the ISX on Tuesday with no prior share sale apart from a token initial public offering in 2013 that sold 55.9 million shares at 1 dinar each, as required to become a joint stock company.
It has 1.83 trillion outstanding shares, so must offer at least 457 billion shares for sale on the ISX - it traded a small fraction of those, 31 million, on Tuesday.
Asiacell closed at 8.25 dinars on Tuesday, down 63 percent from 2013's IPO price of 22 dinars.
"It seems people looked at Asiacell's share price and thought Zain Iraq should be worth something similar, but that totally ignores the differing amounts of shares issued in each company," added Aldahan.
"There was very little trading. The whole objective of the requirement to go public was to get Iraqis interested in share ownership - the process Zain Iraq has undergone really regresses the stock exchange."
Zain Iraq said it was happy to have complied with its licence terms and looked "forward to the participation of the investment community in one of the most profitable and resilient companies in Iraq".
($1 = 1,162.0000 Iraqi dinars) (Reporting by Matt Smith; Editing by Pravin Char)
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