Shares digital

Shares Rating – Kentz

1 (low)-5 (high)

Management: 3

Market: 4

Product: 3

Financial strength: 4

TOTAL SCORE: 14/20

It takes a brave person to float a company in current market conditions. Judging by Kentz and its advisers’ reticence to speak about its IPO marketing, don’t bank on the Irish engineering contractor meeting its planned float on Aim next Tuesday (5 February) until its details are flashing on your trading screen.

Kentz made $25 million pre-tax profit in 2006 mainly from providing oil, gas and mining companies with mechanical, electrical and other types of engineering services. Its clients, which include Shell, Exxon Mobil and Anglo Coal, are cash rich and willing to reinvest gains from high commodity prices back into infrastructure projects – creating opportunities for players like Kentz. It believes joining the stock market will raise its profile and open doors to further international growth.

The company makes money, is participating in a buoyant sector, and has diversified operations that aren’t over-exposed to one particular economy. The group’s fundamentals look sound and with media reports suggesting a market value of £210 million, Kentz is certainly bigger than most other companies about to float on Aim.

Unfortunately, it just may not be big enough to entice the institutions during the IPO marketing. Fund managers, investment banks and private-client stockbrokers are in a tricky situation where they need to commit to low-risk equities capable of producing tidy returns. After seeing many of their share holdings lose considerable value in recent months because of bad market conditions, caution is the prevailing tone in the City as preference is given to defensive large caps.

Kentz has avoided giving details of how much money it wants to raise at listing. It also isn’t clear how much of the business the management and the company’s Malaysian backers will own post IPO.

Market conditions are not in Kentz’s favour so we can’t be sure that its float will get off without a hitch. That said, the business looks interesting and it is always welcome to see another profitable company join Aim, so fingers crossed it manages to squeeze some life out of the institutions.