Hong Kong-based paper recycler Fook Woo will begin marketing an initial public offering to investors this week aimed at raising some US$150 million in fresh capital to fund its expansion and turn its branded recycled tissue products into household names in China.
The HK$1.68 to HK$2.30 price range for the shares represents 9.1 to 12.5 times forecast profit for the year to March 31 next year.
The company, which started collecting waste paper in Hong Kong more than 40 years ago, today ships thousands of tonnes of paper up to four times a week from four collection sites in the city to its factory in Huizhou in Guangdong province.
After sorting and processing, some is sold to third parties as recovered paper for US$200 a tonne, while the balance is recycled into a range of products, including tissue and toilet paper.
Revenues for last year amounted to HK$1.1 billion, a drop of 7 per cent from HK$1.18 billon the previous year, and net profit was HK$173 million, 28 per cent down from 2008's HK$241 million, according to a research report by Swiss bank UBS, one of the bookrunners of the initial public offering.
But following the introduction this year of a new tissue papermaking machine designed by Metso, the Finland-based supplier of paper industry machinery and systems, the company now expects its annual tissue paper making capacity to increase by 22,000 tonnes to 124,000 tonnes.