China CNR mulls Hong Kong IPO
Cash-strapped mainland rail giant may try to raise HK$11.3 billion in a local flotation this year
China CNR, burdened by soaring debt and shrinking cash, may raise HK$11.3 billion from an IPO in Hong Kong this year.
The state-owned enterprise (SOE) has got the approval for an H-share listing on the main board of the Hong Kong stock exchange from the State-owned Assets Supervision and Administration Commission (Sasac), the Shanghai-listed firm announced yesterday.
CNR and CSR Corp, an SOE listed in Hong Kong and Shanghai, dominate the mainland train manufacturing sector.
CNR planned to issue up to 1.82 billion shares in its Hong Kong listing, equivalent to 15 per cent of its total shares, the company said in a recent announcement. Assuming CNR's Hong Kong IPO price equals its closing Shanghai share price of 4.89 yuan (HK$6.20) yesterday, the firm's Hong Kong initial public offering would raise HK$11.3 billion.
However, the actual amount of money raised in any Hong Kong listing would depend on market conditions, said Karen Li, a JP Morgan equity analyst.
"We're positive on the Chinese train market. CSR's orders in the fourth quarter were way bigger than what people expected. We expect more orders for high-speed trains in future," Li said.
On Tuesday, CSR announced it had won 25.63 billion yuan in orders for high-speed trains. On October 21 last year, CNR announced 20.95 billion yuan in orders for trains.
"The use of high-speed trains in China is rising quickly. The switch from planes to high-speed trains is quite dramatic in China," Li added.
The money raised from the IPO would be used to - among other things - establish research and production facilities overseas, repay bank loans, and replenish working capital, CNR said in a recent announcement.
CNR's long-term debt skyrocketed 4,443 per cent to 889.99 million yuan in September from 20 million yuan at the beginning of 2013, "mainly due to adjustments of its debt structure", said the company in a recent announcement. CNR's short-term borrowings tripled to 17.25 billion yuan on September 30, from 5.74 billion yuan at the beginning of last year.
From the beginning of 2013 to September 30, CNR's cash on hand nearly halved to 5.35 billion yuan from 9.03 billion yuan. In the first nine months of last year, CNR suffered a net-operating-cash outflow of 10.1 billion yuan, 4.62 billion yuan more than the same period in 2012.
In the first nine months last year, CNR's revenue fell 9.1 per cent to 58.43 billion yuan, while net profit increased 1.4 per cent to 2.25 billion yuan.
The company aimed to grow its revenue to 140 billion yuan by 2016, said vice-president Yu Weiping on CNR's website.
The company's exports amounted to US$1.5 billion last year, Yu estimated.