PICC's debut success kicks China Silver and CIMC into action
China Silver aims to raise HK$187 million from share offer by year-end while CIMC hopes to switch to H-share market through introduction
Two companies, one a silver processor and the other a manufacturer of shipping containers, aim to list in Hong Kong by the end of the year, joining the fresh wave of initial public offerings in the wake of People's Insurance Company of China's stellar trading debut.
China Silver, a Jiangxi-based processor of the metal, plans to kick off its offering today to raise at least HK$187 million. The new shares were priced at an indicative range of HK$1.18 to HK$1.68 each, translating into a price-earnings ratio of 5.5 to eight times, based on the expected earnings this year, said two people familiar with the deal.
"The company is expected to generate a net profit of 152 million yuan [HK$188.23 million] this year, up more than 30 per cent from 2011," said one of the people, who added the deal had been well covered by a number of long-term institutional investors despite a lack of support by cornerstone investors.
China Silver plans to use the proceeds to fund capacity expansion and bankroll possible upstream acquisitions such as silver mines.
Chen Wantian, China Silver's chairman and chief executive, said the company "adopts a compact production model to hedge against the price volatility of silver", pointing out that its average turnover of inventory has fallen to 48 days in the first half of this year from 85 in 2010.
It plans to increase silver production to 400 tonnes by next year and 550 tonnes in 2014 from 250 tonnes this year.
The group's clients include China Minmetals Nonferrous Metals, a state-run company with a large market share on the mainland, China National Nonferrous Metals Import & Export Jiangxi Corporation and Guilin Coninst Electrical and Electronic Material.
The other listing aspirant, China International Marine Containers (CIMC), is the first mainland company looking to move from Shenzhen's B-share market to Hong Kong's H-share market. It said its Hong Kong flotation would start on December 19.
CIMC's listing in Hong Kong will come as a way of introduction only, without raising new capital. The B shares will be removed from the market today.
The state-owned company aims to convert its 1.43 billion B shares into H shares valued at HK$13.4 billion.
Holders of 137 million of its B shares took the cash option of selling their stock for HK$9.83 apiece after rejecting the H-share conversion, the company said.
B shares were first created for foreign investors seeking to buy mainland stocks, but the market never quite caught on because of a consistently poor run and a lack of quality listings.