Euro-Asia Holdings flowers towards top of range

Beijing''s winning bid for the 2008 Olympics is likely to spur the grey market price of Chinese flower grower and agri-tech company, Euro-Asia Agricultural Holdings.
In a deal led by ICEA Capital, Euro-Asia Agricultural Holdings priced a 400 million share deal last Friday at HK$1.48 per share. Raising proceeds of HK$592 million ($76 million), the deal priced in the upper half of a HK$1.31 to HK$1.55 indicative range.

Bankers comment that the recent poor aftermarket performance of Hong Kong IPOs led the company to hold back a little on pricing at the very top end of the range even though it secured strong over subscription. The Hong Kong retail IPO, for example, closed 78 times oversubscribed, while the institutional placement secured a 12 times level. As a result of clawbacks, there is now a 60% / 40% split between retail and institutional investors.

Local demand is said to have been driven by a belief that the company would be a direct beneficiary of China's winning bid for the Olympics, announced a few hours after pricing on Friday. "This company operates at the luxury end of the flower market and has few real competitors," one banker comments.

Currently, Euro-Asia operates seven production bases, spanning four provinces in North-eastern China. It uses computerized greenhouse facilities from Holland and other advanced technologies in the cultivation of orchid seedlings, although it also produces tulips, cyclamen and gerbera. As of December 2000, about 64% of produce was exported, principally to Holland, Japan and Korea. 

Proceeds are being used to enhance R&D to improve the company's clonal propagation, hybridization and cultivation technologies.

At HK$1.48, the company priced its IPO on a p/e ratio of 6.17 times 2001 earnings on a pro-forma fully diluted basis. There are said to be no direct comparables, although Chinese bio-tech companies such as China Agritech are said to trade at slightly higher p/e's of just under 10 times.

The deal represents 25% of the company’s share capital and will be listed on Thursday. Joint lead manager was ING Barings.
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