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Huiyuan juices up market after IPO

By Lillian Liu (China Daily)
Updated: 2007-03-01 10:21

Shares in China Huiyuan Juice, whose initial public offering (IPO) raised $308 million in Hong Kong, surged 66 percent in their market debut on February 23.

Massive orders pushed Huiyuan shares 50 percent higher in pre-opening trade, with investors willing to pay 53-times forecast 2007 earnings, compared to the 30-times valuation set during its IPO.

The Beijing-based company is China's top maker of pure juice. Europe's leading food and beverage company Danone holds a 22.2 percent stake.

The company sold 400 million shares at HK$6 each, with their projected price range of HK$4.8 to HK$6 per share.

Institutional buying was 100 times oversubscribed, with individual investors 938 times oversubscribed.

Investment bank UBS was the underwriter of the share offer.

Among the best-performing Chinese consumer stocks, Huiyuan Juice is privately run and enjoys significant market share 42 percent of China's pure juice segment.

By comparison, the country's leading dairy products company Mengniu has 32 percent of the milk market.

Fund managers say that Huiyuan may be aiming to emulate Mengniu, whose shares have soared more than fivefold since their listing in 2004, thanks to strong profit growth.

China's fruit and vegetable juice sales are projected to grow 10.6 percent a year to 67 billion yuan in 2010, up from 40.5 billion yuan in 2005, market research firm Euromonitor International said.

However, unlike Mengniu and instant noodle maker Tingyi Holding Corp, which generate more than enough cash for working capital, Huiyuan still needs to set aside retained earnings, the report said.

Huiyuan's 2005 revenue of 1.4 billion yuan was one-10th that of Mengniu's 10.8 billion yuan.

Huiyuan sources most of its oranges from Florida and Brazil.

Orange juice futures have jumped 10 percent since the start of the year as the US Agriculture Department predicted citrus harvests in Florida would be sharply reduced due to hurricanes and disease that have struck groves.