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SCMP Reporter

JINGWEI Textile Machinery says new orders it has secured will translate into strong sales and earnings growth this year.

  Vice-chairman Liu Shi-tong said the order book on January 1 showed 388 million yuan (about HK$360.84 million) in orders, 20 per cent more than the previous corresponding period.

  'The year-end order book usually represents half of the full-year orders, so we believe that the company's sales and earnings will increase substantially this year,' he said.

  In 1995, it had orders worth 714 million yuan.

   Jingwei begins a public share sale today. Jingwei's listing prospectus shows that its net profit would be 68 million yuan for last year, including interest on the proceeds of its share sale.

  It does not give this year's forecast, but Peregrine Brokerage, the securities arm of Jingwei's sponsor, Peregrine Capital, expects Jingwei's net profit to rise 26 per cent to 86 million yuan this year.

  The rise seems inflated by a cut in income tax.

   Jingwei, as a high tech enterprise in Taiyuan, has enjoyed a 15 per cent income tax rate, instead of the statutory 33 per cent, since the second half of last year.

  Peregrine's report shows that Jingwei's operating profit will increase only two million yuan this year, to 101 million yuan, from last year's 99 million.

  Peregrine Brokerage director Gilbert Wong said his firm tended to have a conservative forecast for Jingwei, because it was the company's sponsor.

  He said Jingwei had had to pump in more money for investment, which would incur higher depreciation charges this year, thereby squeezing operating profit. 'Machinery making is different from light industry, which will see quick returns,' Mr Wong said.

 The flotation was to have been held in December, when market sentiment towards H shares was poorer.

  Peregrine Capital chairman Francis Leung said the flotation was postponed because more time was taken to process the listing application and the prospectus.

  'Perhaps we are lucky, because the current market sentiment is much better than that in December.'   Jingwei is the first H-share offering this year.

  Another forthcoming candidate is the Guangzhou-Shenzhen Railway, which will be restructured as a shareholding company soon, paving the way for a dual listing in Hong Kong and the United States.

  Although Jingwei is selling shares at 7.2 times last year's earnings, the lowest among Chinese enterprises listed abroad, it is at the upper end of a proposed range.

  'We choose a relatively high price, because of strong market response,' Mr Leung said.

  He said Jingwei's private placement had been more than fully subscribed.

   DBS Securities analyst Sean He said Jingwei was more appropriate for investors willing to hold for the long term, as he did not expect the company to exceed 10 per cent earnings growth in the next two years.

  'At 7.2 times, you cannot say it is very expensive,' he said. 'But if you look at its risk factors in the short term, it is justifiable.'   Mr He said Jingwei would not immediately benefit from moves to upgrade textile industry technology.

  'There is a time lag between imposing a policy and implementing a policy, and the time lag is usually two to three years,' he said.



Jingwei Textile faces public with orders up