January 19, 2018
By Stephen Lacey and Paul Kilby
(IFR) – This is shaping up as a banner year for equity capital markets in Argentina, where five companies going public in the first quarter are looking to raise a combined US$2.2bn.
That is a lot of supply for a small market – the combined market cap of the benchmark Merval Index is only US$137bn, even after a gain of more than 13% in the first two weeks of 2018.
But foreign capital has been piling in on hopes that the country will be included in the MSCI Emerging Market Index.
After Argentina failed to shed frontier status last June, hopes are that the US index provider will classify it as an emerging market nation this year.
The administration of President Mauricio Macri is ticking all the right boxes as it pushes through capital market reforms.
Not only did last year’s midterm elections suggest long-term support for market-friendly policies, but the elimination of capital gains taxes this year will further spur foreign investment.
Corporacion America Airports, the global airport concessionaire, is seizing on the momentum with a roughly US$650m IPO to fuel expansion.
Its decision to focus on a NYSE listing through more liquid ADRs heightens the chances of MSCI inclusion if an upgrade does occur.
“If the airport is interested in being included in the upgraded MSCI index, it is essential for them to list in the ADR market,” said Simon Mandel, senior vice president of CEEMEA and LatAm equities at Auerbach Grayson.
“But I believe liquidity will return to the local market – and there is a strong argument that a dual listing should be made for the airport.”
Oppenheimer, Bank of America Merrill Lynch, Citigroup and Goldman Sachs launched bookbuilding on Tuesday, marketing 28.6m shares at US$19–$23.
They will conduct a roadshow across Latin America, North America and Europe, with pricing planned for January 31.
Corporacion America, which operates 51 airports but only four outside Latin America, is not selling itself cheaply.
Its marketing range targets a valuation of roughly 9.5 to 12 times EV/Ebitda for 2018, according to the estimates of the underwriting banks.
That compares with 13.7 and 13.1 times respectively for Mexican airport operators Grupo Aeroportuario del Pacifico and Grupo Aeroportuario del Sureste, and 13.2 for Spanish peer Aena.
“Obviously we would like it to come at the low end for a bigger cushion,” one hedge fund manager told IFR. “But in reality it is a seller’s market in Argentina – not a buyer’s market like it is perhaps in Brazil.”
With low-cost airlines and other foreign carriers winning new routes in Argentina following Macri’s market reforms, growth potential may justify some stretched valuations.
“There is a lot of underutilized capacity,” said the hedge fund manager. “More airlines are coming into the market, and the use of proceeds is to expand and modernize smaller airports from which low-cost airlines fly.”
Corporacion America is selling 11.9m shares, while an investment vehicle controlled by Eduardo Eurnekian, the company’s 85-year-old founder, is selling the remaining 16.67m.
Eurnekian is moving away from direct operations after appointing his 39-year-old nephew Martin Eurnekian as chairman last year.
“This is going to be the first deal of a very robust pipeline in the first quarter,” said the hedge fund manager.
Power producer Central Puerto launched an up to US$760m, all-secondary dual-listed IPO that would allow its owners to cash out. Bank of America Merrill Lynch, JP Morgan and Morgan Stanley are marketing the offering through February 1.
Agriculture companies Bioceres and Molino Canuelas have revived IPO plans after failing to go public last year.
Renewable power producer Genneia informed regulators of its intent to go public, while real-estate developer TGLT could dust off its ageing registration statement.
(This story will appear in the January 20 issue of IFR Magazine.; Reporting by Stephen Lacey and Paul Kilby; Editing by Marc Carnegie)
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