Investors Go HAM for Commodity Trader Glencore International Ahead of IPO

Ahead of the initial public offering of Swiss-based commodity giant Glencore International, investors and equity research departments alike continue to find reason for the company's potentially high valuation. Glencore International is a commodities trader (metals and minerals, agricultural products, and energy) and a diversified natural resources conglomerate with interests in companies involved in mining, smelting, and refining. In the energy sector, the company markets such products as coal, crude oil, jet fuel, and gasoline. In the past 10 years, its annual return on equity has averaged 38%. The research departments of Barclays BCS and Credit Suisse CS have valued Glencore at $52.5 billion to $69.2 billion and $53 billion to $68.6 billion, respectively, accordingly to data seen by Reuters. A Barron's report notes that "Whether the deal will be good for investors remains to be seen; the price range won't be revealed until early May, with trading due to start in London and Hong Kong later in the month. Its bankers "will be cognizant of the fact that this issue must be sensitively priced" and could be poorly received if it looks expensive, says David Buik, a senior partner at BGC Partners." Barclays speculates that Glencore earnings will hit $8.86 billion in 2012, or more than double last year, when net profit was $3.8 billion. The company has benefited enormously from the recent ramp-up in commodity prices. According to its website, the main components of Glencore's strategy are: Maintaining geographic scope and diversification of operations, maintaining a conservative financial profile and investment grade ratings, proactively mitigating and managing risk, and capitalizing on strategic investments in industrial assets. Total assets were listed at $79.8 billion on December 31, 2010. Glencore is rated BBB- and Baa2 by Standard & Poor's and Moody's, respectively. Glencore International was founded in 1974 and is currently privately owned by its management and employees.