Royal Mail Demand Could Mean 36 Per Cent Profit

Royal Mail Demand Could Mean 36 Per Cent Profit.

Demand for shares in the Royal Mail flotation is looking like it will drive prices up to the top end of its valuation by Government.

The Government initially set a value at £3bn and there will be 3 billion shares issued at £3 with the Government retaining a third share.

The flotation is thought to already by over-subscribed with huge demand from institutional investors and pension funds.  There is always, as ever, hug interest from the investing public.

As detailed in previous stories on this site

Royal Mail has a virtual monopoly on postal and logistics services in the UK.

It has huge assets in the form of land and buildings.

Its pension liabilities are now underwritten by government.

Comment

Demand, we suggest, will drive the launch share price up to around £3.30 at launch.  Some commentators are now valuing the business at over £4bn meaning that the share price could rise dramatically when subscription closes tomorrow and Royal Mail is floated on Friday.

If the share price does launch at £3.30 and then soars to

• £4 = profit of 21%
• £4.25 = profit of 28%
• £4.50 = profit of 36%

Given these forecasts, we suggest demand will continue until tomorrow evening when subscription closes.