Bottom Line: Careful pricing

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The Independent Online
PROMOTERS of the flotation of Chamberlain Phipps, which produces cobbling materials, have gone to great lengths to ensure that the newly quoted shares will go to a premium when trading begins two weeks from now.

The 165p issue price is modest and the notional yield generous. For example, the flotation price is equivalent to just under 11 times the company's pro-forma earnings per share and the yield is 5.5 per cent.

Chamberlain, supplying component materials to shoe makers, is not in an industry with obvious growth prospects in the UK.

In a static market prices will also always be under pressure, with end customers including Marks & Spencer and Clarke to deal with. In the circumstances it has done well to widen profit margins in its main business from 1.5 to 6.9 per cent in three years.

The pricing of the issue takes account of the problems. It gives opportunities to stagging investors but the long-term prospects are less certain.

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