MOL: Croatian governments plans IPO of INA in November

IPO of INA could start in November 2006 according Mr Damir Polancec, Croatian Deputy Prime Minister. The Croatian government plans to sell a 15-17% package in the oil and gas company, INA for HRK 900 (USD 154) per share. The government's intention is to make a dual listing, by introducing INA shares both to the Zagreb and London Stock Exchanges. According to the terms of the IPO, Croatian government would favor domestic individual investors to institutional at the subscription.
Our view:
The pricing values INA to US$ 1.55bn, which is much less than our fair value calculation of US$ 3.5-4.0bn. Please note that three years ago in a much less favorable crude oil price and refining margin environment, when MOL bought 25% in INA valuing the company to US$ 2bn. Therefore, we expect strong over-subscription of shares.

The low pricing let us suspect a political intention behind the IPO. However, it is still an open question whether MOL would be able to extend its stake parallel with the IPO and if yes, at what price.