Summit Shipping set for IPO roadshow

Sarwar A Chowdhury

Summit Shipping Ltd plans to go public in an attempt to raise funds for business expansion and repayment of bank loans.

If approved by the regulator, it will be the first shipping firm from the private sector entering the country’s stockmarket. Presently, state-run Bangladesh Shipping Corporation is the only player of its genre there.

Two off-dock service providers from the private sector, however, are listed on the stockmarket: Summit Alliance Port Ltd and Ocean Container Ltd.

Summit Shipping, an associate of Summit Group, will float three crore ordinary shares of Tk 10 each using the book building method, a modern pricing mechanism for initial public offering (IPO).

The company, one of the leading market participants in the fuel carrier industry, will hold a roadshow on Thursday for institutional investors for indicative price setting of its shares.

A roadshow is required by the book building regulations and the eligible institutional investors will not be allowed to participate in the bidding unless they participate and quote prices at the roadshow for setting the indicative price.

The company with an existing paid-up capital of Tk 50 crore has proposed an indicative price for each share at Tk 80, including Tk 70 in premium.

With the IPO proceeds, Summit Shipping will repay entire loans which it took from banks and financial institutions so far aggregating around Tk 25 crore, the company said.

“This will improve Summit Shipping’s profitability by around Tk 3 crore, making it debt-free,” it said.

A portion of the IPO proceeds — Tk 180 crore — will be utilised to meet costs of acquisition (including duties, taxes and other pre-operation costs) of two vessels.

Summit Shipping has signed a memorandum of understanding with KAIYO Corporation, Japan, for acquisition of two oceangoing Double Hull Tankers at $1.2 crore each.

“This will increase the company’s hauling capacity by 40,000 tonnes and improve its profitability by approximately Tk 20 crore,” it said.

Summit Shipping operates a fleet of six coastal oil-tankers having carrying capacity ranging from 1,200 tonnes to 2,500 tonnes.

Summit Shipping will use another part of the IPO proceeds of Tk 20 crore against cost of construction of a tank terminal in Narayanganj. “This will improve its profitability by around Tk 4.5 crore,” it said.

The rest of the IPO proceeds will be used for meeting the costs of IPO, 3 percent income tax payments on share premium against the IPO and Summit Shipping’s day-to-day operations as working capital.

Summit Shipping, whose earnings per share (diluted and re-stated) were Tk 2.14 as of September 2010, was set up by Summit Group to transport heavy fuel oil by tanker to the power plant site of Khulna Power Co Ltd from its intermediary store in Chittagong.

Banco Finance and Investment Ltd is the issue manager for the IPO.

Source: The daily star, 16 Jan, 2011