Pact's lacklustre IPO casts shadow over Orora's ASX debut Analysts expect more selling of Orora shares in the coming weeks. The underwhelming sharemarket debut of packaging company Pact Group Holdings has weighed on the demerger of Amcor and its $2 billion Australasian packaging and distribution business, Orora. Orora shares opened at $1.16 and reached $1.20 before settling around $1.19, with more than 29 million of the 1.206 billion shares on issue changing hands. Amcor shares fell by a commensurate amount, down $1.185 to $10.175. Analysts expect further heavy selling in Orora shares over the next few weeks because most of Amcor's international shareholders - who received one share in Orora for every Amcor share - are not considered "natural" or long-term holders of the stock. Before the demerger, analysts had valued Orora shares between $1.40 and $1.75. This suggested that Amcor shares would trade between $9.61 and $9.96. Pact Group's unimpressive debut on Tuesday, when the shares closed at a 12.6 per cent discount to their $3.80 issue price, appears to have dragged down the price of Orora stock. Pact shares closed on Tuesday at $3.32, which represented a multiple of 11.7 times forecast 2014 earnings per share and a multiple of 7.8 times EBITDA. Commonwealth Bank analyst Michael Ward said that applying a similar multiple to Orora implied a valuation of 97¢. Pact Group chairman Raphael Geminder, who reduced his stake to 40 per cent, was forced to defend the timing of the Pact IPO, which raised $649 million. Both Orora and Pact operate in mature or low-growth packaging markets, which generally grow in line with GDP growth, but Pact is focused on plastic food and beverage packaging and Orora on fibre, glass and metal packaging and distribution. Pact has managed to grow sales more than five-fold over the past ten years through multiple acquisitions. Under a so-called Five Cubed strategy, Pact wants to become a $5 billion company operating in five regions within the next five years and is eyeing another half-dozen acquisitions, some of which are related party deals involving Mr Geminder. However, analysts believe Orora offers greater earnings growth potential in the short term as the company benefits from recent "self help" strategies including cost cutting and capital investments. Orora's management, led by Nigel Garrard, expect to realise $30 million to $40 million of cost savings in 2014/15. Broker CIMB has forecast net profits of $103.4 million this year and $134.1 million in 2015, compared with $73.4 million in 2013. The demerger leaves Amcor free to focus on its higher growth and higher margin flexible, rigid plastic and tobacco packaging operations, in the Europe, the Americas and emerging markets in India and Asia. Orora accounted for 22 per cent of Amcor's sales and 13 per cent of earnings. Deutsche Bank expects Amcor's operating margins to rise 100 basis points to 11.5 per cent after the demerger and return on capital to improve by 150 basis points to 21.9 per cent.