China Meilan plans float in HK to fund expansion
China Meilan Group, a Jiangsu-based maker of chlorine and refrigerant products, plans to raise as much as HK$1 billion on the main board in the second half to fund its huge capacity expansion on the mainland, according to a source.
BNP Paribas had been mandated to solely lead the offering, he said.
'The firm has already submitted the preliminary application to the Hong Kong exchange for its first overseas share sale,' another source said.
'If this goes smoothly, the share sale will take place as early as the third quarter, as the company hopes to complete the sale within the year. Still, the final decision is subject to market conditions.'
Despite recent market weakness, some industrial companies still are proceeding with their plans to list shares in Hong Kong in the coming months to raise capital for capacity expansion.
State-run machine tool maker Chongqing Machinery and Electronics Holding and Taiwan's Asia Cement are said to be among them.
The two firms plan to raise a combined US$550 million.
Market watchers said flotations of industrial companies also would suffer from the weak market sentiment. Whether a public share offering succeeded would depend on the pricing strategy and the company's track record, they said.
'If they sell shares at a low single-digit [price-earnings] ratio, long-only funds will still like to accumulate them because of their medium to long-term investment strategy,' said Patrick Yiu Ho-yin, an associate director at CASH Asset Management.
'Solid growth and huge domestic consumption are the two key points professional investors look at. They will shy away from property offerings or export-oriented listings for a long time.'
The lingering subprime crisis has brought the United States economy to the brink of recession, leading to a slowdown in global equity flows over the past few months.
Eight Hong Kong initial public offerings were pulled in January. Four more firms including China Pacific Insurance and mainland developer Evergrande Real Estate Group also dropped their plans this month after working hard preparing to raise a combined HK$44 billion.
Still, two small to medium-sized industrial firms - Solargiga Energy Holdings, a solar equipment maker, and Xingfa Aluminium Holdings - successfully tapped the Hong Kong market for a total of HK$1.4 billion under adverse conditions.
China Meilan, formerly Jiangsu Meilan Chemical, was founded in 1958 and produces refrigerant and chlorine-based products, just like Dongyue Group, which was listed in Hong Kong in December last year.
China Meilan mainly produces five series of products - fluororesin, fluoro-refrigerant, chlorine alkali, pesticide and thermoelectricity.
Dongyue, the largest refrigerant and fluoropolymers producer in the country, raised HK$1.06 billion in its float.
Shares of Dongyue have dropped 30 per cent since their trading debut.