Telecom raises price
China Telecom (Hong Kong) has raised its proposed price range by up to 26 per cent ahead of Monday's public offering.
China Telecom, the cellular phone operator of the Ministry of Telecommunications and Posts, reportedly wanted to curb the subscription frenzy for its stock by raising the issue price.
The company has priced its shares at between $9.50 and $12.60 each, compared with the initial range of between $7.75 and $10, which represents increases of 22.5 per cent and 26 per cent, according to reports.
The new price range will put the China Telecom shares at an aggressive multiple between 26.7 and 35.5, almost double that of Hongkong Telecom, calculated on its projected earnings of 4.41 billion yuan (about HK$4.05 billion) this year.
As the company is offering 2.6 billion shares prior to the over-allotment option, it can potentially raise an additional $6.76 billion, making the flotation size as large as $32.76 billion.
As China Telecom represented the only avenue of taking a direct equity interest in the mainland's telecom sector, analysts expected the offering would be hailed by institutional investors.
Some have voiced concern at the huge red-chip premium pitched by the stock, as it is only bolstered by expectation of asset injection from the ministry in the future.
As red chips have been tumbling recently and China Telecom is pitching a high multiple, the interest in subscription is likely to be dampened.