China port-building leader taps market with HK$16b stock offer
China Communications Construction, the largest port builder in the mainland, plans to raise as much as HK$16.1 billion in an initial public offering, market sources say.
The firm plans to sell 3.5 billion new shares at between HK$3.40 and HK$4.60 each, or 13 to 18 times forecast earnings next year. A 15 per cent overallotment option could lift the offering to HK$18.6 billion.
That valuation compares with Vinci, a French civil engineering company, which trades at 17 times next year's forecast earnings, while South Korea's Samsung Engineering trades at 28 times expected earnings next year.
The indicative price range looks relatively high to some market observers, particularly those who expect an economic slowdown in the United States next year to hit the mainland's export sector.
'China has been running at full industrial tilt for three to four years now and I think we can say that [it] is overstretching itself on ports,' said one fund manager.
But others said the relative underdevelopment of infrastructure in China's west and northeast could attract investors.
'[Beijing] will continue to set aside huge budgets to improve and enhance infrastructure in less developed regions regardless of global economic performance,' said Louis Wong, a director at Phillips Securities.
Merrill Lynch, Bank of China International and UBS are arranging the sale for China Communications Construction, which is offering a 24.5 per cent stake to investors.
The firm and bookrunners start an investor roadshow tomorrow in Hong Kong. The retail tranche of the offer opens on Friday and closes on December 6. The firm will set the final share price on December 9. Trading begins on December 15.
China Communications Construction abandoned its initial plan to raise up to HK$20 billion by selling shares simultaneously in Hong Kong and the mainland due to technical issues. But a domestic listing is expected to go ahead in the first quarter of next year.
China Communications Construction plans to sell up to 15 per cent to China Life Insurance (Group), tycoon Li Ka-shing and Prince Alwaleed bin Talal of Saudi Arabia. Such so-called cornerstone investors act as a draw to other investors who may be worried about issues such as corporate governance in mainland companies.
The firm's net profit is expected to rise almost 33 per cent to 2.8 billion yuan this year, BOCI said in a research report. Besides building ports, the company has dredging, port machinery and roads and bridge construction operations.
The central government said it plans to invest 3.8 trillion yuan on transport-related infrastructure projects as part of the 11th Five-Year Plan that stretches to 2010.
