Kazakhstan's sovereign wealth fund, Samruk-Kazyna, on Sept. 25 sold nearly 9.9 million JSC National Atomic Co. Kazatomprom global depositary receipts at US$13 apiece in an accelerated bookbuild via the London Stock Exchange and Astana International Exchange, the top uranium producer said in a Sept. 26 news release.
The US$128.2 million secondary placing was priced 12% below the company's market closing price of US$14.75 before the announcement, and saw investors pick up 3.8% of Kazatomprom's issued share capital. The company had initially said Sept. 25 that it intended to sell approximately 6.5 million global depositary receipts, or GDRs, representing 2.5% of its shares.
The sale reduces Samruk-Kazyna's ownership to 81.2% from 85%, raising Kazatomprom's free float to 18.8%. It was necessary because of the stock's lack of liquidity, a source familiar with the matter told S&P Global Market Intelligence.
Kazatomprom noted that 5,023,021 GDRs, or 51% of the total, were placed through the local Astana bourse, while the remaining 4,840,000 went via London. International investors picked up 66% of the sale, with domestic investors accounting for 34%.
The latest offering forms part of the Kazakh government's 2016-2020 plan to partially privatize the nuclear fuel miner, with up to 25% of the business to be sold off to investors. The process got going in November 2018 with the IPO of a 15% stake in London and Astana, which raised US$450 million at US$11.6 per GDR.
The placing is subject to a 180-day lockup period, implying no further deals until at least April 2020, when the wealth fund can dispose of up to a further 6.2% interest.
Samruk's decision not to sell the full 10% stake now is understandable because the uranium market is still relatively weak, Wood & Company analyst Ildar Davletshin told Market Intelligence. "Selling more shares now would be giving away potential upside in the future," he said.
The 12% discount looks quite high and may indicate a lack of sufficient demand, especially looking at how the stock is trading following the placement, according to Davletshin. "Lack of liquidity is the big issue for the stock and one of the key reasons for its significant discount to Cameco Corp.," he noted.
Taking into account Kazakhstan's sizable privatization pipeline for the near future, the sale of the remaining 6.2% will likely take place shortly after the 180-day lockup period expires, which again may put pressure on the stock in the short term, Davletshin concluded.
J.P.Morgan Cazenove analyst Dominic O'Kane described the placing as positive for the miner's attractiveness to investors, forecasting EBITDA growth from 2019 onward, driven by higher uranium prices and production growth after 2021. "We believe Kazatomprom's significant valuation discount can narrow over time versus its closest comparable listed peer, Cameco," he said in a Sept. 26 research note.
