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SCMP Reporter

CHINA'S Jingwei Textile Machinery Co plans to raise about $300 million next month, the smallest flotation among the second batch of H-share companies so far listed in Hong Kong.

  Managing director Liu Shitong still faces an uphill task to convince investors that the textile machinery maker is not battered by the factors which have recently sent share prices of Chinese enterprises into a tailspin.

  'We hope Jingwei's flotation will mark the rebirth of H shares,' Tim Fu Tingmei, vice-president of Peregrine Capital (China), Jingwei's sponsor, said.

  The listing plan, including a placement and a public offering, was ratified by the Hong Kong stock exchange listing committee on Thursday.

  Jingwei will sell 160 million H shares, which represents 40 per cent of its enlarged share capital, taking into account a proposed issue of 20 million A shares in Shanghai next year.

  Mr Fu said it would not adopt a book-building system to fix the issue price, considering its small flotation.

   Jingwei's offering comes to the market after Guangdong Fotao Corp shelved its listing last month due to lacklustre response.

  Founder (Hong Kong), which presents itself as a red-chip counter, instead of a H-share, received three times subscription last week, after the flop of China Apollo's flotation.

  Mr Liu did not give the price earnings multiple at which Jingwei would pitch, but said: 'We don't have high hopes on it.

  'If we offer the shares at a lower price, investors will get a higher return and they will be more interested in the stock.'   He said Jingwei would use the proceeds to develop new products, expand production capacity, enhance product quality, and improve its research capabilities.

  China National Textile Machinery Corp president Mei Zaisen said Jingwei would become the group's primary listing vehicle, and in future acquire the group's remaining 19 subsidiaries.

  Founded in 1954 in Yuci, Shanxi province, Jingwei is China's biggest textile machinery maker. It beats off Shanghai-listed Shanghai Erfangji to occupy 54 per cent of the domestic market of ring spinning frames, 90 per cent of rotor spinning machines and 87 per cent of drawing machines.

  The company expects sales to reach 700 million yuan this year, up 36 per cent from last year's 513 million yuan, with a gross profit margin of more than 20 per cent.

  Jingwei will enjoy 15 per cent corporate tax instead of the statutory 33 per cent, as the company was registered in the Taiyuan's High and New Technology Development Zone when it became a stock company on August 18.

   Although the austerity programme and shortage of cotton had seriously eroded business in the textile sector, Mr Liu said the company was not affected because of its wide customer.

  'As the market is so big, as long as there is a portion of customers who want to upgrade their technology, we will have enough business,' he said.

  Under the Ninth Five-Year Plan, the Ministry of Textile Industry will spend 50 billion yuan on upgrading the technology level of the industry.

  Mr Liu said Jingwei had secured full orders for the first half of next year, an increase from the same period this year.

  He also brushed aside the threat of more imports because of price competitiveness when China cut tariffs next year.

  He said the firm sold ring spinning machines for 130,000 to 150,000 yuan, while imports would cost 400,000 to 450,000 yuan before custom duties and value-added tax. He said Jingwei was also not hit by triangular debt problems.



Jingwei Textile faces flotation fight