Luoyang Float Glass reduces issue
LUOYANG Float Glass has decided to scale down the number of H shares issued in Hong Kong following the international placement of shares.
The mainland glass maker will now issue 250 million shares instead of 300 million shares. The issue price is expected to be fixed soon as the international segment was scheduled to be completed yesterday.
''I don't think it's market-driven,'' said a merchant banker close to the issue, adding that Beijing was believed to be involved in the decision to cut back the number of the shares on offer.
He described the response to the company's international roadshow as good, dismissing concerns that a poor market reception had prompted the move.
Officials at China Development Finance, Luoyang's sponsor, were not available for comment yesterday.
Luoyang initially intended to raise about $900 million to $1.15 billion from an issue of 300 million shares, with a price-earnings multiple between 10 and 12.5 times.
It also planned to set aside 75 per cent of shares for international placement and 25 per cent for a public offering in Hong Kong, to begin on June 21 to 24. Its shares would start trading on the exchange on July 8.
But it is not clear how the change will affect the flotation size and the proportion for the placement.
Luoyang will kick off the flotation of a second batch of 22 mainland state-owned enterprises designated for listing abroad. Another candidate Shanghai Haixing Shipping is jostling to become the second to list.
As China's largest floating glass maker with a market share of 17 per cent, Luoyang has reported substantial earnings growth for the past three years on the back of the country's economic boom and great demand for construction materials.
Last year, its net profit soared almost five-fold to 263.58 million yuan (about HK$234.59 million) from 56.21 million yuan in 1992, outstripping the rise in turnover.
During the period, its sales more than doubled to 785.71 million yuan from 345.27 million yuan.
But Luoyang forecasts a drop in earnings for this year ending December to 242 million yuan, weighed down by an increase in tax expenses with an income tax of 33 per cent after becoming a foreign joint venture.
The nine H share companies in the first batch of mainland enterprises now enjoy a privilege income tax rate of 15 per cent, because they were approved before China implemented new taxation reforms in January.
Luoyang has earmarked the issue proceeds for expansion of production lines. After the flotation, it will hold a 81.15 per cent interest in Luobo Group Longmen Glass Company in Henan, 75 per cent shares of Qingdao Taiyang Glass Industry and a 17.5 per cent stake in Chenzhou Bada Company.
But the company will face intense competition when China abolishes the 30 per cent import tariffs on float glass as the country struggles to be re-admitted to the General Agreement on Tariffs and Trade.