Bottom Line: No bargain at ED&F

THE 180p share price set for the flotation of ED&F Man, giving an initial market capitalisation of pounds 460m, is 10 per cent below some hopes. That is doubtless partly because the FT-SE 100 index has fallen by 200 points since ED&F announced its intention to go public, but it also reflects a number of uncertainties about the company.

ED&F has debt three times the size of its asset base. High borrowing is commonplace among importers, but whatever the justification stratospheric gearing will always unnerve.

Second, despite the use of hedging instruments ED&F may be vulnerable to big swings in commodity prices. Its classification as a food manufacturer - one of the least favoured sectors - hardly helps, nor does its exposure to the dollar exchange rate.

That is reflected in the 9.5 times historic multiple and the generous 6 per cent notional yield. That payment would, however, be less than twice covered by earnings which, together with the risks of the business, makes it less of a bargain than it seems.