• Tue
  • Jul 29, 2014
  • Updated: 5:40pm

China Shenhua eyes 66b yuan in A-share sale

PUBLISHED : Monday, 24 September, 2007, 12:00am
UPDATED : Monday, 24 September, 2007, 12:00am
 

China Shenhua Energy, the mainland's largest coal producer, will raise as much as 66.6 billion yuan from a domestic share sale, the biggest offering in the mainland.

Shenhua Energy's A-share deal will exceed that of China Construction Bank, which raised 58.05 billion yuan in a domestic initial public offering earlier this month.

China Shenhua yesterday said it set the price for its 1.8 billion A shares at between 34.99 yuan and 36.99 yuan each.

The range represents a 14.5 per cent to 19 per cent discount to its shares listed in Hong Kong that ended 1.59 per cent lower at HK$43.30 on Friday.

The shares had risen 135.4 per cent this year.

Mainland firms tend to price their A-share offerings lower than their H shares, a practice that has led to substantial gains in trading debuts because investors place higher valuations on stocks listed in the mainland. Shares in the mainland trade at an average 53 times earnings compared with 17 times in Hong Kong.

According to its preliminary prospectus, China Shenhua will issue as many as 630 million shares, 35 per cent of the total offering, to institutional investors.

The rest will be sold to retail investors.

China Shenhua said it planned to invest about 16.7 billion yuan of the sale proceeds in 19 projects to upgrade its coal, electric power and transport systems.

The company said it would use 16 billion yuan as working capital for the next three years.

It also plans to spend some of the funds on strategic mergers and acquisitions.

China International Capital Corp and China Galaxy Securities are arranging the sale.

China Shenhua raised US$22.97 billion in Hong Kong in 2005, becoming the world's largest initial public offering by a coal company.

The company's first-half earnings jumped 19.8 per cent to 10.3 billion yuan from 8.6 billion yuan a year ago, thanks to strong domestic demand amid the country's soaring power consumption.

Sales for the six months to June rose 29.8 per cent to 38.3 billion yuan.

Meanwhile, China Oilfield Services, the largest provider of equipment and services to mainland oil firms, said it had fixed the price of its A-share initial offering at 13.48 yuan per share, the top end of the indicative range.

As a result, China Oilfield is expected to raise 6.74 billion yuan from the sale.

Its A shares are priced at a 16 per cent discount to its H shares, which fell 0.98 per cent to HK$16.10 each on Friday. The shares have risen more than 200 per cent since last year.

The stock is scheduled to debut on the Shanghai Stock Exchange this Friday. CICC is the lead underwriter of the share offering.

China Oilfield was looking to a full-year profit for this year of 1.83 billion yuan, a 62 per cent jump from a year ago, according to the company's preliminary prospectus.

China Shenhua and China Oilfield's share sales are the latest big stock offerings in recent weeks, as the central government encouraged Hong Kong-listed mainland conglomerates to list shares in the domestic market as a way of soaking up abundant market liquidity and improving the quality of companies on the local stock exchanges.

PetroChina, the biggest oil producer in Asia, is set to become the next big corporate to list A shares after the China Securities Regulatory Commission approved its plan last week. The company may raise as much as the equivalent of HK$50 billion from the share sale, based on the price of its H shares.

The firm plans to invest about 16.7b yuan on its coal, power and transport systems

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