China Coal Energy devises 22b yuan share sale to fund expansion
China Coal Energy, the nation's second-largest coal company by market value, said it planned to sell shares in the mainland in a deal worth 22 billion yuan to fund expansion.
The company would sell as many as 1.52 billion A shares in Shanghai, China Coal said in a statement posted on the Hong Kong stock exchange website yesterday.
Proceeds of the sale would go towards coal, methanol, coke and power projects, the company said.
China Coal's A-share listing follows other leading mainland firms that have been encouraged by the government to return to the domestic market to help its development. Their return will increase the supply of stocks from bigger and high-quality firms to meet rising demand from investors.
China Shenhua Energy, the nation's largest coal producer, said earlier this month that it would sel1 1.8 billion A shares in a deal worth about 47.8 billion yuan.
PetroChina said last month it would return to the A-share market with a deal of similar size.
China Construction Bank, China Telecom, CNOOC, Lenovo Group, Citic Pacific, China Netcom Group and China Merchants International (Holdings) are among overseas-listed mainland firms expected to raise funds for domestic share sales.
Regulators in Beijing have also encouraged mainland companies to issue shares on domestic bourses rather than in Hong Kong in the hope of bringing valuations down to more realistic levels with more supply.
The Shenzhen index trades at 60 times last year's corporate earnings and the Shanghai index trades at 40 times compared with the Hang Seng Index, which trades at 17 times. The mainland stock market is the most expensive in Asia.
The total value of mainland initial public offerings this year is expected to reach 400 billion yuan, double the volume last year, according to PricewaterhouseCoopers. About 75 per cent of that volume would come from mainland companies listed elsewhere.
The company did not give a price estimate for the proposed A shares, which generally are set at a discount to H shares.
Based on China Coal's last closing price of HK$14.58 on Friday, the deal is worth 22 billion yuan.
The A-share sale will represent 11.5 per cent of the company's enlarged share capital. As a result, China Coal's H shares will be diluted to 30.97 per cent of shares after the sale from 35 per cent.
China Coal said last month that in the first four months of the year, it produced 21.08 million tonnes or 15.6 per cent more commercial coal year on year. Commercial coal is washed and processed before sale.
It also produced 29.12 million tonnes of raw coal in the four months, 24 per cent more than last year, the company said.
Commercial coal is the main revenue earner for the company. Output of coke, a form of processed coal used to make steel, surged 56.8 per cent to 990,000 tonnes.
Citi initiated coverage of China Coal last week with a 'buy' rating and set a 12-month target price of HK$20 a share.