Payout plan fires up GST offering
Anette Jonsson and Fiona Lau
Listing candidate GST Holdings, a designer and manufacturer of fire alarm systems, is forecasting a 29 per cent increase in earnings this year, driven by China's rapid improvement in living standards.
It said robust growth in the construction and real estate industries, coupled with a government focus on promoting fire safety, would boost projected net profits to 159 million yuan this year from 122.8 million yuan last year.
GST, which is launching its initial public offering in Hong Kong this month, told investors attending the first day of the roadshow that it planned to pay 30 per cent to 40 per cent of those earnings as dividends.
It said it had a 20 per cent to 25 per cent market share, more than twice that of its closest rival.
The profit projection is in line with the 30 per cent annual earnings growth seen over the previous three year.
GST, founded by its chairman and president in 1993, hopes to raise between $338 million and $412 million from the sale of about 200 million new shares, or 25 per cent of its enlarged share capital.
The indicative price range of $1.69 to $2.06 per share valued the firm at nine to 11 times this years' earnings, sources said.
The funds will be used to increase production capacity.
Retail subscription for the share offer will open on Monday and trading is to start on June 30. Morgan Stanley, the sole book runner, declined to comment on the offer.
SIM Technology, also aiming for a trading debut June 30, has posted strong profit growth in the past few years, according to its preliminary offering document.
The Hong Kong-based design house for handsets saw its net profit rise by 2.9 times from 2002 to 2003 and another 4.3 times to $46.31 million last year. It has not provided projected earnings for this year.
It said gross profit margins on its main products - mobile handset solutions and GSM/GPRS modules - had continuously improved, but they had fallen on its LCD modules to 12.7 per cent last year from 15.6 per cent in 2003.
As a result, SIM had reduced its turnover of LCD modules to 34 per cent of total sales last year from 73 per cent in 2003, it said. SIM will sell 375 million shares to raise up to $814 million.