Changhsha Zoom­lion seeks $2.1 bil­lion in Hong Kong share sale

The Pak Banker - - Company& -

HONG KONG: Chang­sha Zoom­lion Heavy In­dus­try Sci­ence & Technology Devel­op­ment Co. is seek­ing as much as $2.1 bil­lion in a Hong Kong stock sale as Chi­nese growth spurs de­mand for con­struc­tion equip­ment.

The world's largest sup­plier of con­crete-mak­ing ma­chin­ery is of­fer­ing 870 mil­lion shares at HK$13.98 to HK$18.98 apiece, ac­cord­ing to terms for the trans­ac­tion. Zoom­lion, which is al­ready listed in Shen­zhen, China, will have a mar­ket value of $12.7 bil­lion if the sale is priced at the top of the range, ac­cord­ing to the terms.

Zoom­lion, which also makes cranes, road­mak­ing equip­ment and fire trucks, plans to raise funds as China boosts spend­ing on build­ing high­ways, fac­to­ries and rail­ways. The sale val­ues the com­pany at as much as 15.6 times next year's ex­pected earn­ings, com­pared with about 15 times for Hong Kong-listed wheel loader maker Lonk­ing Hold­ings Ltd.

"There's still some in­vestor in­ter­est in in­dus­trial IPOs such as Zoom­lion be­cause China's econ­omy is still grow­ing," said Ron­ald Wan, man­ag­ing di­rec­tor of China Mer­chants Se­cu­ri­ties Co. "One po­ten­tial risk is ris­ing in­fla­tion in China, which could in­crease raw ma­te­rial costs." Zoom­lion, based in Chang­sha, cen­tral China, plans to price the shares on Dec. 17 and to start trad­ing on Dec. 23. The sale in­cludes an over­al­lot­ment op­tion of 130.4 mil­lion shares. China In­ter­na­tional Cap­i­tal Corp., Gold­man Sachs Group Inc., JPMor­gan Chase & Co. and Mor­gan Stan­ley are man­ag­ing the of­fer­ing.

The crane maker fell 1.1 per­cent to 14.08 yuan at the 11:30 a.m. trad­ing break in Shen­zhen. The stock has gained 35 per­cent this year, com­pared with an 8.5 per­cent de­cline for the Shen­zhen Stock Ex­change Con­stituent A-share In­dex. The China-listed stock trades at about 20 times next year's es­ti­mated earn­ings.

China's spend­ing on ur­ban fixed as­sets jumped 24 per­cent through Oc­to­ber. Zoom­lion, which gen­er­ated more than 90 per­cent of its sales in the coun­try last year, ex­pects an­nual profit to jump at least 76 per­cent in 2010, it said on Dec. 1.

The com­pany has fac­to­ries in Shang­hai, Hu­nan, Shaanxi and Guang­dong. It also has op­er­a­tions in Europe fol­low­ing the 2008 ac­qui­si­tion of Cia Ital­iana Forme Ac­ciaio SpA.

Com­pa­nies have raised a record $45.2 bil­lion, ex­clud­ing over­al­lot­ment shares, through Hong Kong IPOs this year, ac­cord­ing to Bloomberg data. AIA Group had the largest sale, rais­ing $17.8 bil­lion in Oc­to­ber. De­mand for new shares has waned in Hong Kong, while the bench­mark Hang Seng In­dex has de­clined 6 per­cent from its Nov. 8 high for this year, be­cause of con­cerns that China's at­tempts to tackle in­fla­tion may damp growth.

Con­sumer prices rose 4.4 per­cent in Oc­to­ber, the fastest pace in two years. China plans to adopt a "pru­dent" mon­e­tary pol­icy next year, state-run Xin­hua News Agency said on Dec. 3 af­ter a meet­ing of the rul­ing Com­mu­nist Party's polit­buro. Sa­teri Hold­ings Ltd., the Chi­nese cel­lu­lose maker with op­er­a­tions in Brazil, priced its IPO shares at the bot­tom of the range, two peo­ple fa­mil­iar with the trans­ac­tion said on Dec. 4. It raised HK$3.33 bil­lion ($429 mil­lion).

A day ear­lier, China ZhengTong Auto Ser­vices Hold­ings Ltd., the sec­ond biggest Bay­erische Mo­toren Werke AG dealer in China, priced its IPO in the mid­dle of the range, rais­ing HK$3.65 bil­lion, ac­cord­ing to two peo­ple with knowl­edge of the mat­ter. China Rong­sheng Heavy In­dus­tries Group Hold­ings Ltd., the nation's largest ship­builder out­side state con­trol, has fallen 9 per­cent from its Hong Kong share sale price since rais­ing HK$14 bil­lion last month. -Bloomberg

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