Zhongwang starts IPO roadshow
Updated: 2009-04-21 07:21
By Joey Kwok(HK Edition)
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HONG KONG: China Zhongwang Holdings, Asia's largest producer of aluminum extrusion products, plans to raise as much as HK$12.32 billion from an initial public offering (IPO) in Hong Kong, market sources said.
The company yesterday started marketing the IPO - the world's largest since China South Locomotive raised $1.57 billion in August last year - in apparent disregard of weak investor sentiment towards new shares sales.
Conita Hung, who heads equity markets at Delta Asia Financial, has described prevailing investor mood towards IPOs as "cautious", while CASH Asset Management associate director Patrick Yiu said Zhongwang's listing will do little to perk up activity in the IPO market.
Zhongwang, a private enterprise based in Liaoning province, plans to sell 1.4 billion shares in Hong Kong at HK$6.80 to HK$8.80 apiece.
Sources said pricing of the new shares is likely around 10.4 to 13.5 times its expected earnings in 2009.
The new shares issue will represent roughly 26 percent of its enlarged share capital.
Public subscription is set on Friday through April 29. Trading of Zhongwang's shares on the local bourse will start on May 8. CITIC Securities, JP Morgan and UBS are handling the shares sale.
Zhongwang intends to use the IPO proceeds to expand its production capacity, repay debt, and improve research and development.
Analysts expect Zhongwang to benefit from the central government's 4-trillion-yuan economic stimulus package, a significant portion of which has been earmarked for infrastructure projects.
Most of Zhongwang's products are used by the transport sector, including railway companies.
Delta Asia's Hung said the estimated price for Zhongwang's shares is attractive, but its IPO may not necessarily attract a strong response from investors.
"Investors are quite cautious now," she said. "They are wary of the risks posed by continuing adjustments in global markets."
She noted that Hong Kong's stock market lacks momentum this year in the absence of large companies seeking a listing to raise funds.
"It will be difficult to spur the IPO market unless a significant number of large mainland enterprises seek a listing here," Hung said.
CASH Asset Management's Yiu said the local IPO market will probably improve later this year if investors will become more confident towards the market.
"The IPO market will turn better, if the market sentiment improves," Yiu said.
He does not expect Zhongwang's listing to stimulate the overall IPO market in Hong Kong because of the nature of its business and the pricing of its shares.
Last year's earnings of Zhongwang, ranked among the world's top three aluminum extrusion product makers, more than doubled to 1.9 billion yuan from the previous year's level.
(HK Edition 04/21/2009 page16)