Zhengzhou Coal Mining eyes US$300m second listing in Hong Kong

Zhengzhou Coal Mining Machinery Group, the mainland's largest coal-mining equipment maker, plans to raise about US$300 million to US$350 million through an initial public offering in Hong Kong later this month, three people with direct knowledge of the transaction said yesterday.

The Henan-based company, which is listed in Shanghai, may offer the shares in Hong Kong at about a 15 per cent discount to its Shanghai shares. The Hong Kong shares are likely to be within an indicative range of HK$10.38 to HK$12.28, or a price-earnings ratio of 6.5 to 7.7 times next year's earnings.

The size of the offering is about 221 million shares - equivalent to 15 per cent of the company's enlarged equity capital.

In Shanghai, the company's share price dropped 0.65 per cent to 9.18 yuan (HK$11.40) yesterday. It is down 26 per cent from the start of this year, probably on investor worries about the country's slowing electricity output and the industrywide overcapacity in the coal sector.

In a bid to prevent a failed deal launch, four so-called cornerstone investors have promised to subscribe to a combined US$120 million worth of the new shares. They include two Hong Kong-listed firms, Inner Mongolia Yitai Coal and Huadian Fuxin Energy, which will take up to US$30 million of shares each.

The company aims to start its investor roadshow as soon as today, and the final pricing will be set on November 28. The shares will debut in Hong Kong on December 5, according to the people familiar with the deal.