China Agri lifts IPO on earnings growth

PUBLISHED : Friday, 16 February, 2007, 12:00am
UPDATED : Friday, 16 February, 2007, 12:00am

China Agri Holdings, a unit of the mainland's largest grain trader Cofco International, had boosted the size of its Hong Kong initial public offering by about 50 per cent because of its strong earnings growth, market sources said.

The size of the deal had been raised to HK$2.5 billion from the original HK$1.6 billion, and the company was meeting potential investors, sources said. Goldman Sachs and BOC International are arranging the deal.

'Given its impressive earnings growth rate, the firm can obtain a higher valuation and target a larger fund-raising size to HK$2.5 billion,' said one source.

China Agri, which is engaged in biofuels and biochemicals, brewing materials, oilseed, wheat and rice processing business, had profit of HK$506.6 million for the first nine months of last year, and is estimated to earn at least HK$622 million for the full year, compared with HK$254.9 million in 2005 and HK$130.7 million in 2004, sources said.

The company will begin accepting orders from institutional investors from February 26, with its shares expected to list next month.

Most of the initial public offering proceeds would be used to fund China Agri's production capacities, in particular biofuel and biochemical businesses, market sources said.

China Agri earmarked capital spending of HK$1.7 billion last year, which will increase to HK$3.3 billion this year and HK$2.8 billion in 2008, of which 70 per cent is set aside for biofuel and biochemical production expansion.

For the first nine months of last year, oilseed processing accounted for 66.5 per cent of its overall turnover while biofuels and biochemicals made up only 6.7 per cent.

Cofco International shareholders in November approved the company's plan to buy HK$5.33 billion worth of businesses including agricultural ventures, Coca-Cola bottling and winemaking from its parent as well as the spin-off of China Agri. The spin-off will separate China Agri from Cofco International's consumer businesses such as edible oil and winemaking.