Sinotrans a bullish story

Brushing aside market worries about an imminent United States-led invasion of Iraq, Sinotrans has pulled off its HK$3.4 billion initial public offering with the shares being 20 times subscribed.

The popularity of the offering meant the unit of China's biggest freight forwarder priced its shares towards the top end of the initial range at HK$2.19 each, or about 13 times its forecast earnings for this year.

Given the valuation is at the high end, are the logistics company's shares still worth buying in the secondary market?

'It's a fair price', based on fundamentals, said Ben Kwong of KGI Asia. Nevertheless, he expects the shares to rise by 10 per cent to 20 per cent in the short term on speculative trading and a slightly more positive tone in what has been a badly depressed market.

It is possible to build a bullish story for Sinotrans, with China stocks back in favour with global investors. The line goes that China's World Trade Organisation accession will mean more open markets and hence increased foreign trade, translating into greater demand for the transport and logistics services provided by Sinotrans.

Low-cost China is rapidly becoming the workshop of the world and Sinotrans, with its market's leading position, should be a prime beneficiary as foreign direct investment pours into the export trade.