Ecopetrol Demand Surges Despite Valuation Issues

Phones were ringing off the hook Monday at Bogota’s major brokerages as local investors called in with orders for blocks of shares to be offered in Ecopetrol’s $2.7bn equivalent IPO. The largest ever equity offering from Colombia – in its most important corporate name – has been in the works for months, with repeated calls from President Uribe for Colombians to participate in what he calls the democratization of the country’s crown jewel. But on the opening day of the offering, which will take place in three rounds – two local, one international – some local dealers said COP1,400 a share was too high. For Nelson Fernando Espinosa, of Visión de Valores, which estimates fair value based on price to EBITDA at COP1,206, the stock is still a buy, but not such an exciting one. “We’re losing some major upside in the stock by buying it at COP1,400,” he tells LatinFinance. Others, however, believe the price is right. Corredores Associados, a local brokerage, bases its estimate on price to book value and price earnings ratios at comparable E&P companies around the globe, which come in at slightly higher levels than Ecopetrol. “We originally had the price at COP950-COP1,050, but adjusted that view when the underwriters released additional information,” says Raul Pacheco, an analyst at Corredores, referring to the company’s plans for expansion and new businesses. The first round, for locals associated with Ecopetrol exclusively, will conclude September 25.