Zhongwang IPO already 'twice oversubscribed'

PUBLISHED : Friday, 24 April, 2009, 12:00am
UPDATED : Friday, 24 April, 2009, 12:00am

China Zhongwang Holdings' global share offering of up to HK$12.32 billion, set to be the largest in the world so far this year, is already twice oversubscribed, sources said.

The management of the world's third-largest maker of extruded aluminium products has been on the road for the fourth day to market the offering.

Zhongwang, which makes products for the construction and industrial sectors, is forecasting a net profit of at least 1.35 billion yuan (HK$1.53 billion) for the first half, according to the final version of its listing prospectus released yesterday.

Net profit jumped 124 per cent to 1.91 billion yuan last year from 852.15 million yuan in 2007, after a profit of 551.42 million yuan in 2006.

Chief financial officer Cheung Lap-kei (right) said the Liaoning-based company had already received orders for this year, exceeding last year's turnover of 11.26 billion yuan. 'We are also optimistic of our second-half profit,' he added.

Zhongwang used to focus on the construction sector but made a strategic move in 2002 to gradually shift its sales to the industrial sector, particularly the transport industry, covering railways, vehicles and aviation.

Mr Cheung said the firm expected to get up to 80 per cent of sales from the industrial sector 'in the near future'. This segment accounted for 53 per cent of sales but 80 per cent of gross profit last year.

By 2011, Zhongwang planned to exit the construction sector, he added. The industrial segment's profit margin rose to 39.8 per cent last year from 26.6 per cent in 2006, while that of the construction segment dropped to 12.4 per cent from 13.5 per cent.

Zhongwang plans to use about HK$3.7 billion of listing proceeds to expand its annual output capacity to 800,000 tonnes by 2011 from 530,000 currently, and HK$3.7 billion to buy equipment and facilities to further make higher value-added and more lucrative downstream products.

It said it might choose to acquire rivals to help achieve its capacity expansion target. However, vice-president Lu Changqing said it had no intention of investing in debt-laden, Guangdong-based rival Asia Aluminum Holdings, which is under liquidator administration.

He said Asia Aluminum focused mainly on the overseas and construction markets, which was a different strategy from Zhongwang's.

Citic Securities, JP Morgan and UBS are the joint bookrunners of the offering, which is priced at 10 to 13 times this year's estimated earnings.

They will start taking orders from retail investors today.