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SCMP Reporter

GUANGZHOU Shipyard and Beiren Printing Machinery are to list in Hongkong at far lower prices because of the poor market response to the first two mainland listings.

  Guangzhou Shipyard will launch its public offer this week. Beiren Printing Machinery will follow a week later.

  Guangzhou Shipyard is hoping to raise about $300 million, while Beiren is looking at $200 million, according to industry sources.

  The price-earnings (P/E) ratio of Guangzhou Shipyard will be set at about eight-times (10-times on a fully diluted basis) and Beiren 11 times.

  These are much lower than P/E ratios of 17.8 times and 15.8 times respectively for the first two Chinese state-owned companies listed - Tsingtao Brewery and Shanghai Petrochmeical.

  Brokers said investors had become cautious about H shares as the market reaction to the first two mainland firms was not encouraging.

 Shanghai Petrochemical's issue was just 0.77 times subscribed, while Tsingtao Brewery was reported to be 110 times oversubscribed, far behind market expectations of 200 to 300 times.

  It is expected that both Guangzhou Shipyard and Beiren will receive a better market response because of the smaller size of funds they are seeking to raise.

   Beiren recorded a net profit of 12.8 million yuan (HK$17.28 million) and turnover of 253 million yuan last year.

  It is one of the largest makers of sheet-fed printing machines in China and is a key enterprise of the State Electrical and Mechanical Department. It is also the country's largest maker of offset presses.

  Guangzhou Shipyard had 52 per cent of its turnover last year generated from shipbuilding, 38 per cent from container production, two per cent from ship-repairing and eight per cent from other sources.

  Last year, the company's foreign currency income was US$83 million, higher than Tsingtao Brewery's $50 million.

  G. K. Goh Securities senior economist Ben Kwong Man-bun said that considering the local market sentiment and the complications of the state-owned enterprises, the two new mainland listings had to make their stocks attractive.

  China Securities Regulatory Commission chairman Liu Hongru said six out of the nine mainland enterprises scheduled for listing on the Hongkong stock exchange would enter the market this year.

  Yizheng Joint Corporation of Chemical Fibre and Maanshan Iron and Steel are likely to be the next two companies to go public.

  Mr Liu said mainland listings would proceed as planned.

  Chinese authorities have launched austerity programmes to cool the country's overheated economy.

   ''The nine [listings] do not belong to the area which is under the correction. We are adhering to our original policy and plan,'' Mr Liu said.

   Mr Liu attributed the lukewarm market response to Shanghai Petrochemical's listing to the lack of understanding of the potential of such a big organisation.

   SBCI Securities associate director Lawrence Ang said that these mainland enterprises were badly in need of funds to lessen the burden of foreign currency borrowings.



Lower prices on offer for next mainland listings