OREANDA-NEWS. March 05, 2010. EMAlliance reported it was to hold an IPO to the extent of 10-15% of its current shares in April or May 2010. The placement price could equal USD 0.221-0.405 per share; however, the company has not yet announced the price range officially. If demand for the security is strong, EMAlliance could increase the IPO size to 25% of share capital.

In our opinion, a slight delay in the IPO is not to have any negative impact on either EMAlliance or its publicly listed subsidiary, Krasniy Kotelschik. However, we note that after EMAlliance shares are listed on stock exchanges, the liquidity of Krasniy Kotelschik may dramatically decrease. We do not rule out even that EMAlliance could decide to delist Krasniy Kotelschik in the future, which could negatively affect its investment appeal. As for the potential valuation range, based on the available data, EMAlliance has been valued at a total of USD 345-548 million. This valuation corresponds to a 2009 EV/S of 1.6-2.6 and therefore looks quite expensive.

We estimate the fair price for Krasniy Kotelschik at USD 0.62 per common share with a 15% upside and USD 0.39 per preferred share with a 4% downside. The rating for both securities is HOLD.