A YEAR ago, Jardine Fleming Securities presented a potential B-share issue to Hong Kong institutional investors. The B-share market was poor at the time and the issue was pulled. This flotation, Shanghai Jin Jiang Tower, a luxury hotel, will now go ahead.
At the time, the average price-earnings ratio for Shanghai B shares was about 18. It now stands at 14 and the Jin Jiang Tower B shares are being issued at a slight discount to the market, which the company finds acceptable now whereas it did not last year.
The number of shares to be issued has not changed and remains at 90 million. However, the offer price has been raised from 21 yuan to 33 yuan. The price-earnings ratio is still about the same after this year's jump in profits and is 9.7 times this year'searnings or 12.7 times fully diluted.
This is clearly a rare stock, being the only listed five-star hotel in China at a time when business travellers find it increasing difficult to find good hotel rooms.
Shangri La Asia, listed in Hong Kong, traded at nearly 17 times earnings.
Jin Jiang Tower Hotel was fully opened in 1990 at a cost of US$100 million. Hotel occupancy has been rising sharply from just over 60 per cent in 1991 to 90 per cent last summer and has settled at just under 80 per cent as new hotels have come on stream.