ZTE in pole position for listing
Mainland telecoms equipment supplier on track to beat Minsheng Banking as the first A-share firm to list in HK
China's No2 telecommunications equipment supplier ZTE Corp is on track to become the first mainland A-share company to list in Hong Kong after it was revealed that China Minsheng Banking Corp's listing ambitions had run into delays due to shareholder resistance.
The Shenzhen-listed A share, which revived its once-aborted H-share plan in the summer, now hopes to receive the go-ahead from the Hong Kong stock exchange in the middle of next month, paving the way for a December launch of a US$350 million offering sponsored by Goldman Sachs.
ZTE's timetable is likely to clash with a string of companies aiming to sell shares before the Christmas holiday, including national carrier Air China, Beijing Youth Daily, a subsidiary of Taiwan-listed Hon Hai Precision Industry's telecommunications equipment unit Foxconn International Holdings and wireless network equipment provider Shenzhen Powercom. These five companies are expected to raise about HK$12 billion.
ZTE submitted its latest listing application to Hong Kong Exchanges and Clearing in July, about a month after Minsheng, and the two A-share companies have been racing to become the first to launch a landmark offering in Hong Kong.
ZTE first applied to launch in Hong Kong in 2002, but the plan was aborted in April last year due to opposition from shareholders over price issues.
Similarly, Minsheng's H-share offering, which is also being sponsored by Goldman, has been bogged down by shareholders' concerns that the value of their A-share holdings may be diluted because of the huge valuation gap between the Hong Kong and mainland stock markets.
Until now, mainland companies have first listed in Hong Kong with a lower valuation before floating their shares in the domestic markets where they command higher price-earnings multiples.
ZTE and Minsheng are the first companies to attempt to reverse the trend.
It took ZTE nearly two years to convince its shareholders to accept that a Hong Kong listing would not diminish the value of their shares in the mainland market before they finally gave their approval in June.
The company plans to sell 160 million H shares or up to 20 per cent of its share capital in Hong Kong.
ZTE plans to use the listing proceeds to finance its expansion in overseas markets and to develop new products and technologies.
The telecommunications equipment supplier said in its interim results that it would step up its efforts to expand into overseas markets after more than doubling its earnings.
Buoyed by a 353.48 per cent growth in exports, ZTE reported a 163.46 per cent year-on-year surge in first-half profit to 513.18 million yuan. Turnover for the period doubled to 11.77 billion yuan. International sales quadrupled to 2.07 billion yuan.
Goldman is the sole sponsor for ZTE's listing while Minsheng's flotation is sponsored by Citigroup, Deutsche Bank and Goldman.
