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Yurun is counting on its earnings record to offset poor sentiment towards IPOs

Mainland pork producer China Yurun Food Group plans to raise $1.5 billion to $2 billion in a listing on  Hong Kong's  main board, a person familiar with the situation said yesterday.

'The company  got the approval from the listing committee last Thursday and plans to kick off its roadshow next week, with the listing date set for July 28 tentatively,' said the source.

'The  market sentiment is poor but Yurun has its selling points of being a China consumer concept and also [having] a high profit growth track record.'

Yurun, China's second-largest chilled pork producer and third-biggest frozen pork maker in terms of live pigs slaughtered, has 10   pork production centres and 10  processed meat production facilities.

The source said that the company planned to sell  416 million shares  within a price range of   12 times to 15 times  this year's earnings.

Last week, shipping firm China Cosco, fire alarm system maker GST and Sim Technology all fell on their listing debuts, reflecting the poor market for initial public offerings.

Nanjing-based Yurun expects its net profit  this year to almost double to $337 million   from 171.9 million yuan last year   and 156.8 million yuan in 2003.  Its net profit in 2002 was 74.6 million yuan.

Revenues in the past three years were 2.69 billion yuan,  1.96 billion yuan,  and 1.53 billion yuan.

More than  70 per cent of Yurun's revenues come from  chilled and frozen pork and  almost all of its products are sold through its own sales and distribution networks across  the mainland.

Of the total of 416 million shares,  90 per cent of  will  be reserved for institutional investors,  the remaining 10 per cent  being for  retail investors.

Sixty-six million of the shares will be placed by holders of convertible instruments, which will be converted to shares immediately preceding the offer.

The Government of Singapore Investment Corp and CDH China Fund, an ex-shareholder of China Mengniu Dairy,  both hold convertible instruments of the company,  worth US$18 million and US$12 million, respectively.

Goldman Sachs is also an investor in Yurun  and will own 7.09 per cent of the company after the listing. Goldman Sachs and Guotai Junan Capital are sponsors of the deal.

Zhu Yicai, the founder and  chairman of the company, is Yurun's largest shareholder and will hold 56.21 per cent of the company after it lists.

The company plans to spend about $590 million on expanding its production capacity, another $207 million for working capital and $156 million on the acquisition of land and  production plants held under  leases with  associates of controlling shareholders.

It will spend a further $52 million on research and development and $31 million on expanding its sales network.

ON THE MENU

Nanjing-based Yurun plans to sell 416 million shares

The price will be between 12 and 15 times this year's earnings

Proceeds will fund expansion and be used as working capital



China's No 2 pork producer targets $2b in share sale