Romanian fuel distribution company JP Grup Oil to launch Bucharest IPO

Romanian fuel distribution company JP Grup Oil to launch Bucharest IPO
JP Grup Oil is the latest in a series of companies to announce IPOs on the Bucharest Stock Exchange this year after activity was stimulated by the listing of hydropower giant Hidroelectrica in 2023.
By Iulian Ernst in Bucharest May 27, 2024

Romanian fuel distribution firm JP Grup Oil, controlled by local businessman Jean Paul Tucan (90%), has announced plans for an IPO on the Bucharest Stock Exchange (BVB). 

The company estimates its business at €37mn and seeks to raise €11mn-13mn in exchange for 28.5% stake with the IPO designed to capitalise on a highly optimistic if not unrealistic growth story that relies mostly on the development of a €25mn petroleum products terminal in Constanta port

Most of the proceeds (80%) will be used to finance the company’s working capital, 10% to develop the chain of fuel stations in retail centres (a new business line) and 10% to buy tank trucks.

The Financial Supervisory Authority (ASF) has approved the prospectus for the 10-day IPO scheduled to begin on May 28.

The company estimates its 25mn existing shares at RON7.38 (€1.48), each, resulting in a pre-IPO valuation of €37.1mn.

The company’s turnover dropped by 25% from €60mn in 2022 to €45mn in 2023 while its net profit remained roughly steady at €1.2mn-1.3mn.

Given the past results, investors are entitled to question the valuation, which is visibly forward-oriented and reflects expectations for massive expansion after the completion of the €25mn terminal.

Nearly half of the €25mn terminal project is financed under the EU’s Large Infrastructure Operational Programme (LIOP), with the rest coming from the company’s own resources and €9mn bank loans.

JP GRup Oil wants to sell 10mn new shares at a price of RON6.5 with a 16% discount for early subscribers resulting in total proceedings of €11mn-13mn for the 28.5% stake on sale.

The company’s expansion story is highly optimistic, and there is some confusion between the targets set out in the prospectus and those mentioned by CFO Steluta Lebidov in its press release. 

“Our solid results over the last ten years indicate a steady growth in turnover from RON136mn in 2014 to almost RON300mn [actually RON224mn] in 2023. Based on these figures, from 2025 our forecasts show an increase in the quantity sold from 50 thousand tonnes to 500 thousand tonnes per year, which will generate a multiplication of turnover by approximately 10 times, from RON300mn to almost RON3bn,” said Lebidov in the press release emailed to bne IntelliNews

This indicates the company’s turnover has doubled over the past ten years and is projected to soar ten times over an unspecified period of time.

The prospectus, however, (which remains the only official document) includes only a three-year forecast and envisages a 50% y/y increase in the company’s turnover this year to RON330mn followed by 100% y/y growth rates in 2025 and 2026 – resulting in a RON1.23bn turnover in 2026. 

This impressive projected three-year expansion is expected to lead to a RON52mn net profit in 2026. Even so, the turnover would have more than double to reach the RON3bn target mentioned by the company’s CFO.

“The profit increase at approximately RON80mn (€16mn) will be generated by two additional sources of revenue, specifically the services provided within JT Terminal and the trading activity on JT Grup Oil,” the company’s CFO said.

Regarding the purpose of the IPO, the company declared that most of the money (80%) would be used to finance the working capital. The rest would be used to develop the company’s fuel retail in commercial centres.

Located in the North Constanta Port area, the fluvial-maritime zone, the terminal developed by JP Grup Oil will have eight tanks with a total storage capacity of 31,500 tonnes. With a capacity of 1mn tonnes per year, it will serve Romania, Hungary, Serbia, Austria and Ukraine, a huge market, which today is in acute need of higher storage and distribution capacities, the company’s officials explained in March.

For comparison, Oil Terminal announced it completed in January a new 55,000-tonne tank. It handled 3.9mn tonnes of diesel, 3.2mn tonnes of crude oil and 0.4mn tonnes of petrol in 2023, to name the major commodities only. Its turnover was RON350mn and the net profit was RON14.3mn.

JP Grup Oil's IPO announcement follows IPOs by several other Romanian companies on the Bucharest Stock Exchange this year, as activity has been stimulated by the listing of hydropower giant Hidroelectrica in 2023.