Mongolian IPOs: hot or cold?
Resource-rich Mongolia is considered a hot story among Asian investors, but an analysis of the IPOs of companies working in Mongolia shows their stocks have struggled, both in Asia and abroad.
The next test of equity investor demand will be the planned flotation of coal miner Erdenes Tavan Tolgoi in London, Hong Kong and Ulan Bator. If it goes ahead, the IPO will usefully expand the small band of Mongolia-linked companies in which international investors can actually put their money.
If the shares subsequently do well, it could help reassure investors who have watched the rather patchy post-IPO performance of other Mongolia-linked companies.
Only one of the three Hong Kong listings of companies with substantial operations in the Mongolia is up since listing, according to Thomson Reuters data. Only one of the five listed elsewhere has gained, and that one company has fallen by more than 50 per cent in the year to date.
The Mongolian Mining Corporation, listed last October in Hong Kong, is up 17.8 per cent from its listing last October. Centerra Gold, a Toronto-listed company with operations at Mongolia’s Boroo mine, is up 5.5 per cent year to date. But exploration companies working in Mongolia have had a tougher time of it recently.
Petro Matad, a London-listed oil explorer, is up 60 per cent since listing in 2008, but has fallen so far this year 52.1 per cent. Both of the Australian-listed mining companies with substantial interests in Mongolia are down since listing.
The other company listed in Canada, uranium explorer Khan Resources, is down 76.5 per cent since listing in 2006, including a fall of 36.5 per cent year to date.
In Hong Kong, Winsway Coking Coal is down 53 per cent this year, driven in part by a Moody’s report this July that raised questions about the company’s negative free cash flow.
The number of Mongolia-related companies listed remains small, and analysts say that Tavan Tolgoi’s IPO should be successful despite the overall uneven performance of other Mongolian-related resource groups. Mongolian Mining Corporation is the closest comparison to Tavan Tolgoi, as the two coking coal companies mine the same licence area, says one Hong Kong-based analyst.
“MMC is probably three to four years further advanced relative to [Tavan Tolgoi], so we think there’s a blueprint for [Tavan] in MMC,” says the analyst. “I think the valuation will read through”.
Mongolia’s resource riches are well-flagged, but investors, it seems, have been slower to jump on the bandwagon. The excitement now surrounding Tavan Tolgoi’s listing suggests the success of MMC broke the ice.
Yet the uneven returns of riskier exploration companies investing in Mongolia suggests it’ll take a few more winners to convince the world that Ulan Bator, the world’s coldest capital, is now a hot story.
The next test of equity investor demand will be the planned flotation of coal miner Erdenes Tavan Tolgoi in London, Hong Kong and Ulan Bator. If it goes ahead, the IPO will usefully expand the small band of Mongolia-linked companies in which international investors can actually put their money.
If the shares subsequently do well, it could help reassure investors who have watched the rather patchy post-IPO performance of other Mongolia-linked companies.
Only one of the three Hong Kong listings of companies with substantial operations in the Mongolia is up since listing, according to Thomson Reuters data. Only one of the five listed elsewhere has gained, and that one company has fallen by more than 50 per cent in the year to date.
The Mongolian Mining Corporation, listed last October in Hong Kong, is up 17.8 per cent from its listing last October. Centerra Gold, a Toronto-listed company with operations at Mongolia’s Boroo mine, is up 5.5 per cent year to date. But exploration companies working in Mongolia have had a tougher time of it recently.
Petro Matad, a London-listed oil explorer, is up 60 per cent since listing in 2008, but has fallen so far this year 52.1 per cent. Both of the Australian-listed mining companies with substantial interests in Mongolia are down since listing.
The other company listed in Canada, uranium explorer Khan Resources, is down 76.5 per cent since listing in 2006, including a fall of 36.5 per cent year to date.
In Hong Kong, Winsway Coking Coal is down 53 per cent this year, driven in part by a Moody’s report this July that raised questions about the company’s negative free cash flow.
The number of Mongolia-related companies listed remains small, and analysts say that Tavan Tolgoi’s IPO should be successful despite the overall uneven performance of other Mongolian-related resource groups. Mongolian Mining Corporation is the closest comparison to Tavan Tolgoi, as the two coking coal companies mine the same licence area, says one Hong Kong-based analyst.
“MMC is probably three to four years further advanced relative to [Tavan Tolgoi], so we think there’s a blueprint for [Tavan] in MMC,” says the analyst. “I think the valuation will read through”.
Mongolia’s resource riches are well-flagged, but investors, it seems, have been slower to jump on the bandwagon. The excitement now surrounding Tavan Tolgoi’s listing suggests the success of MMC broke the ice.
Yet the uneven returns of riskier exploration companies investing in Mongolia suggests it’ll take a few more winners to convince the world that Ulan Bator, the world’s coldest capital, is now a hot story.
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