SAIC waits for better times in US$2b offering

PUBLISHED : Wednesday, 07 June, 2006, 12:00am
UPDATED : Wednesday, 07 June, 2006, 12:00am

SAIC Motor, the mainland's second-largest carmaker, plans to raise up to US$2 billion in an initial public offering as soon as the Hong Kong stock market stabilises, sources said.

'Risk appetite is next to nothing in the market right now,' a source said.

The launch of the deal was 'a question of market timing' and would come in the second half, another source said.

The Hang Seng Index hit an almost six-year high at 17,301.79 points last month but has since fallen to close yesterday at 15,973.11 on investor fears of continued interest rate increases. Despite the slump, the index is still 7.37 per cent ahead this year although analysts and investors expect the volatility to continue until the summer.

SAIC's smaller rival, Dongfeng Motor Group, which raised $3.97 billion in December last year, trades at 13 times estimated earnings next year. Its shares have more than doubled since it listed and closed at $3.425 yesterday.

SAIC expects to attract investors with plans to make luxury cars based on foreign models and competes directly against Nanjing Automobile Group in producing cars based on Rover models.

Nanjing Automobile bought a factory from British carmaker Rover earlier this year and plans to start making cars based on Rover designs while SAIC was earlier granted the right to make cars based on the Rover 75 design.

SAIC's Shanghai-listed subsidiary, Shanghai Automotive, has joint ventures with Volkswagen and General Motors Corp. The firm posted a second quarter of profit in the first three months of this year, driven by higher sales.

Mainland car sales rose 54 per cent to 1.25 million units in the period, the China Association of Automobile Manufacturers said.

Mainland carmakers were expected to sell 6.5 million cars this year due to rising incomes amid the country's fast economic growth, it said.

Mainland carmakers intending to raise funds from share offerings include China Southern Auto Holdings, which is preparing a US$500 million deal, and Beijing Automobile Works with an offering of about US$600 million. Beijing Auto operates a joint venture with Hyundai Motors and another with DaimlerChrysler.

BOCI, Merrill Lynch, Morgan Stanley and Deutsche Bank are arranging the SAIC deal.