Labour wants the Royal Mail float called off, but it reinforces the message that the shares sound like a strong buy

Panmure Gordon may have sent out what it probably thought was a simple, optimistic – and rather clever – note on Royal Mail last week. It took a look at the possible valuations of Royal Mail and compared it to rival national mail carriers in Germany, Austria and Singapore, among others, and deemed the firm to be around £1bn undervalued.
The stockbroker estimated the organisation to be worth between £3.7bn and £4.5bn, £1bn higher than its current official valuation of between £2.6bn and £3.3bn.
The story is covered here in details by the International Business Times while other analysts have suggested that shares valued at 330p could rise to 450p as the Daily Mail reports. But such predictions have created a political storm.
Labour Shadow business secretary Chukka Umunna called for the sell off to be called off on Sky News at the weekend.
It is also thought that the potential value of the property portfolio is undervalued. That has been valued at more than £787m in the prospectus, though Umunna argues that the central sorting office at Mount Pleasant sorting office in Clerkenwell, London could actually be worth £1bn with Nine Elms not far away in Vauxhall could worth £0.5bn.
It is clear that the mail will have to be sorted somewhere but it does suggest the price could be on the low side.
But should Mindful Money readers be concerned? First currently the Royal Mail is owned by the country and its taxpayers. From this point of view, the more value that can be extracted the better. But if you are worried, one way to offset such concerns is to buy shares. If Panmure Gordon is correct then even at the upper end of the range this looks like a bargain.
So if you want to offset the risk that the country won’t be getting value for money or that the price of stamps will rise precipitously, then buying those shares seems to make sense though of course you only have about two more days  and it looks like the share issue will be oversubscribed.
And if you are wondering if they are a long term hold, well, you have plenty of time to make up your mind. To quote Panmure Gordon again, for now, they represent an excellent investment opportunity.

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