SAMSON Paper Holdings is seeking to raise $128 million on the stock exchange for expansion in China and Hong Kong. The paper trading company will issue 100 million new shares at $1.28 each, to be traded on the Hong Kong stock exchange from December 1. Most of the capital raised will be used to build a paper-processing joint venture in China and to fund other expansion projects in the country. The rest of the proceeds will be used to purchase new warehouse and office premises in Hong Kong and to settle mortgage loans. Its prospective price earnings multiple for the year to 31 March, 1996, is 5.7 times based on forecast net profits of not less than $84 million. Fully diluted earnings per share is projected to be $22.3 cents. The directors are expecting a final dividend of 6.4 cents per share. The company's net profits for the four months to July 31 this year stood at $44.17 million, with total turnover of $741.4 million. A total of $18 million or 15 per cent of the net proceeds will be used on a sheeting plant in southern China. Another $15 million, accounting for 13 per cent of the proceeds, will be allocated as working capital for business development and expansion. Company chairman Sham Kit-ying said: 'We plan to increase our sales in the China market from five per cent of our total turnover to 10 per cent in two years.' The other partner in the joint-venture had not been finalised but Mr Sham said an agreement could be struck soon. The plant would increase the group's sheeting capacity to 3,000 tonnes a month, enabling the group to boost the supply of higher-priced paper sheets. The company would increase sales to China as part of the expansion plan. Hong Kong made up 95 per cent of the group's sales while the balance was exported to China. The ratio would be reshuffled to 90 per cent for Hong Kong and 10 per cent to China under the expansion. 'In China, each person is only consuming an average of 20 kilograms of paper every year,' Mr Sham said. 'This figure is far behind developed countries. 'Hong Kong has a yearly paper consumption of 270 kg per head and the United States 320 kg per head. 'If China is going to increase its paper consumption by three kilograms per person per year, that would take up the total stock of the five global paper suppliers.' Mr Sham believed the development of China would lead to a surge in demand for high-quality paper. Apart from the sheeting plant, the group planned to expand production of high-quality computer forms. An investment of $3 million from the proceeds would be used to upgrade machinery and to expand the production lines for computer forms. About 30 per cent or $35 million of the proceeds would be used to purchase warehouses and offices in Hong Kong to reduce rental expenses. The group is paying $4 million to $5 million for warehouses. The company was facing a mortgage bill of $28 million, of which $9 million was a short-term loan with a repayment period of less than 12 months. About 24 per cent of the proceeds raised would be used to clear all mortgage loans, after which the group's gearing ratio would stand at 2:1 of its total asset value.