Beijing’s fiscal tightening measures and US jobless data are weighing on market sentiment, but Shanghai’s IPO market remains busy, with several companies ready to list.
Mingtai Aluminum is in the market for a Rmb1.2 billion ($187 million) IPO in Shanghai. The company is offering 60 million A-shares at between Rmb18 and Rmb20 each, which values the company at 25.7 to 28.5 times its projected 2011 earnings — much higher than other Hong Kong-listed aluminium players. China Zhongwang, a maker of aluminium extrusion products, is priced at 5.88 times earnings, and China Hongqiao, which listed in Hong Kong in March this year after a $943 million IPO, is quoted at 4.9 times.
Some 12 million shares, or 20% of the offering, will go to institutional investors, while the remaining 80% is earmarked for retail investors, according to a stock filing to the Shanghai Stock Exchange. There is no greenshoe option in the deal. Ping An Securities is the underwriter.
The Henan-based company was founded in 1997 and makes aluminium sheets, coils and foil, which are essential materials for making printers and other electronic products.
Some analysts predict that China’s aluminium companies are set to benefit from the country’s strong growth in fixed-asset investment and recovering industrial activity. Power production, which is reckoned to be a good indicator of how busy China’s factories are, climbed 12% last month. Industrial profits at bigger firms in China were up by 20% during the first seven months of this year, according to CLSA, a Hong Kong-based brokerage. “These are indicators that the industrial picture in China is growing at a pace consistent with about 9.5% GDP growth,” said Andy Rothman, a China strategist at the firm.
However, the overall market environment doesn’t look very favourable for new issuers. The Shanghai Composite Index has fallen 12% so far this year as the People’s Bank of China raised interest rates five times. It has ordered banks to set aside more capital 12 times since the beginning of 2010.
Nevertheless, new deals keep coming. Shaanxi Coal Industry plans to raise up to Rmb17.3 billion in a Shanghai IPO. The company said in a preliminary prospectus posted on the China Securities Regulatory Commission (CSRC) website that it would offer 2 billion shares and has hired CICC, BOC International and Citic Securities to manage the deal.
Shenzhen-based AVIT, which provides digital TV systems, is seeking to raise Rmb429 million by offering 26 million new shares at Rmb16.5 each, which prices the company at 50 times earnings. It has appointed China Merchant Securities to arrange the deal, according to a statement to the CSRC.
Apart from Mingtai, there are four other companies vying for investors in the A-share market this week.
The 922 companies listed on the Shanghai exchange posted a total income of Rmb8.25 trillion and net profits of Rmb853 billion during the first half of this year, up by 26% and 22.7%, respectively, year-on-year, the exchange said in a statement on its website. More than 60% of those profits came from the publicly traded banks and energy companies. Overall, 806 companies recorded higher profits, while 116 suffered losses during the first half.