Food packaging firm CPMC up 13pc on debut

PUBLISHED : Tuesday, 17 November, 2009, 12:00am
UPDATED : Tuesday, 17 November, 2009, 12:00am

Shares of food packaging firm CPMC Holdings, which raised HK$1.08 billion in an initial public offering, closed 13.4 per cent higher in their trading debut yesterday.

CPMC, a subsidiary of Cofco Group, opened at HK$6.90 and went as high as HK$7.05 before closing at HK$6.11. The shares were offered at HK$5.39.

The largest metal packaging company in the country, it has Tsingtao Brewery, Coca-Cola China, Budweiser and China Resources as major clients.

CPMC priced its offering at the top end of the HK$3.85 to HK$5.39 range and plans to use more than 40 per cent of the proceeds to build production facilities in Wuhan.

According to a pre-listing report by Sun Hung Kai Financial, CPMC has been priced at 26.1 times estimated earnings this year. Sister company China Foods, another subsidiary of Cofco, is trading at 23.1 times estimated earnings. The report said CPMC's pricing would be more reasonable if it was at the bottom end.

Despite a good response from investors, analysts said recent offerings such as CPMC, which was more than 200 times oversubscribed, had attracted many speculators.

'A lot of people who have bought new shares are not in for the long term,' said Mark To, an associate director at Prudential Brokerage. 'It's less to do with the fundamentals of the companies and more to do with how well the stock market is doing at the time.'

The trading debuts of Evergrande Real Estate Group and Trinity earlier this month have been more impressive. Evergrande surged nearly 35 per cent above its offer price of HK$3.50 on its first day and closed at HK$4.37 yesterday, a gain of 24.9 per cent on its offer price. Trinity traded yesterday at HK$2.46, the same as its first-day closing price, up about 49 per cent from its HK$1.65 offer price.

To expected other flotations such as China Minsheng Banking Corp to bring more speculators, saying: 'Many new shareholders will immediately sell their holdings on the first day of trading to take a quick profit. 'They will then wait for a correction in the share price and reconsider after looking at the earnings potential of these companies.'

Some of this year's new listings have already issued profit warnings. Silver Base Group Holdings, which listed in April, and Amber Energy, listed in July, both said in statements to the stock exchange they were likely to report declining profits.


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