Analysts Back Cut-Price Hapag-Lloyd IPO as a Good Buy

Hapag-Lloyd's scaled-back IPO has now made its shares more attractively priced, analysts say.

Drewry Maritime Equity Research (DMER) analysts have marked Hapag-Lloyd's upcoming IPO as a good buy given the company's diversification across global shipping routes, World Maritime News reports.

"We recommend investors to subscribe to the Hapag-Lloyd's IPO given much of the underlying sector disappointment has been discounted in the price," Analysts Rahul Kapoor and Nilesh Tiwary said in a research note.

According to separate reports, the company scaled back its IPO by 40 percent due to market volatility, and is now aiming to raise $300 million instead of of $500 million as originally planned. 

The reduced price band of €23–€29  ($26-$32) per share will purportedly make Hapag-Lloyd the cheapest container operator of its size at the time of its IPO. 

Kapoor and Tiwary said that although oversupply still continues to plague the industry, Hapag Lloyd's capacity size, in addition to better-than-expected results from its merger with Compañía Sud Americana de Vapores (CSAV), give the IPO a significant upside.

"We see the offering as attractively priced, providing an opportunity to take exposure in one of the largest and financially sound container shipping companies," they said. 

"Even as meaningful upside in the short term and sector recovery on the ground remain elusive, DMER believes the current valuations are likely to provide a floor to the share price and gradually create value for its shareholders." 

Ship & Bunker reported last week that Hapag Lloyd had confirmed its commitment to the IPO despite market pressures, with previous reports also pegging the listing to take place mid-November.