RYANAIR shares will he priced after equity markets close in New York tonight and the price will be announced simultaneously in Dublin and New York tomorrow. The announcement is expected in Dublin at 2.30 pm. and in New York at 9.30 a.m..
Institutional investors will be able to trade in the shares on the Nasdaq "grey market" in New York from tomorrow while full trading is expected to begin in Dublin and New York on June 3rd or June 4th.
With orders for the shares now closed, Ryanair and its advisers will get together tonight to set the price at which the shares will be floated. That price will be based on demand over the past two weeks investors have been invited at roadshows in Europe and the US to make bids for shares in the airline.
In Dublin most fund managers expect Ryanair shares to achieve a premium after flotation mainly because of the current strength of equity markets and the small number of shares on offer.
In strong equity markets, and with airline shares performing well, Ryanair shares are expected to be priced to ensure that they rise on flotation.
Some Irish fund managers expect the shares to come to the market at 180p to 190p - the pre-flotation pathfinder document set a target price range of 165p to 195p. They expect the issue to be oversubscribed for technical reasons. Ryanair is issuing a total of 54.2 million shares, or 35 per cent of the company after flotation. The company plans to sell half of the shares in the US, a quarter of the shares in Dublin and the remaining quarter in other European markets.
With only 13.6 million shares on offer to Irish institutions and Ryanair due to account for about 1.5 per cent of the Dublin ISEQ Index, demand for fund managers is expected to be strong as they try to achieve a market weighting in the shares.
A number of Irish fund managers said yesterday that they had placed bids for enough shares to reflect the weighting of Ryanair in the Dublin index. Some said they had acted on the basis that the issue would be oversubscribed and their demand would have to be scaled back.
"If the bids are not scaled back that will be a bad sign," one fund manager commented.
Barring a disaster in the air or on stock markets, the flotation should go well, another suggested. "The technicals are good - there is not a lot of stock on offer - it's an exciting, if risky, story and the company has an impressive management team," he said. The main risk factors were that a small drop in passenger numbers could wipe out profits and that the airline might not be able to continue to expand at its current rate, he added.
"A price of about 12 to 15 times prospective earnings seems reasonable, given the airline's prospects and booking levels and its pricing deals with airports," another fund manager commented. Tentative preliminary forecasts for earnings per share this year range from 13p to 16p.
Fund managers said the positive factors for Ryanair include: the strength of equity markets; people are spending more money on leisure and travel; the company has a low cost base and a strong record in growing travel markets. Negative factors include: the expected removal of duty free sales in two years; the requirement to replace fleet in three years; and the company operates in the difficult and cyclical airline sector.
