The Investment Column: Kingston


PRIVATE INVESTORS can be forgiven for being envious of the citizens of -upon-Hull. With up to 10,000 shares available per household, Hull residents will be the only retail investors with a guaranteed opportunity to buy shares in the flotation of the city council-owned telecom company Communications.

Given the strong demand for telecommunications issues, 's stock market debut on 19 July is likely to see the shares ring up a modest premium from their initial public offer pricing. With the shares to be priced between 175p and 225p that puts a mid-range capitalisation on of pounds 700m.

This values the company at 4.7-times historic sales and 21-times earnings before interest, tax, depreciation and amortisation. Although that seems steep, rapid growth at the Torch subsidiary, which provides high-speed local phone networks to small and medium-sized businesses, and steady single-digit growth in the core telecoms operation, is likely to halve those ratios within four years. Building on networks in Yorkshire and the South-west, Torch plans to add a new regional network each year for the next decade. Start- up costs will drain away cash until about 2001, at which point earnings will rise sharply as the impact of expansion is outweighed by Torch's increased size. For as a whole, revenue growth should be around 20 per cent per year - nearly triple the level shown by British Telecom in the past year.

Hull investors must apply for their shares by 7 July with institutional orders due by 9 July. The pricing of the offer, which is being sold via a bookbuilding process, is likely to be toward the high end of the indicative price range and is due to be announced on 12 July. Dealings are expected to start 19 July. Definitely, one to tuck away.