China Machinery Engineering, a state-controlled engineering contractor in the power sector, plans to kick off a roadshow today in an attempt to raise about US$380 million through a Hong Kong listing.
The Beijing-based company is selling 718 million shares in an indicative range of between HK$4.10 and HK$5.40 a share, translating into a price-to-earnings ratio of 9.2 to 12 times based on this year's forecast earnings, according to a pre-deal report by Bank of China International.
In a bid to prevent an unsuccessful launch, the company has secured at least five so-called cornerstone investors, including Nanjing Turbine & Electric Machinery and Xi Lian International, as well as Hong Kong-listed companies such as property developer China Overseas, China's largest maker of rail vehicles CSR, and the newly listed PICC Group. The big-name investors pledged to subscribe to a combined US$165, or 43 per cent of the total deal, and hold the stock for six months. Pricing of the shares is set for December 14 and the trading could start on December 21.
A handful of anchor investors expressed buying interest in the new shares because the deal provides significant exposure to overseas developing markets, where revenue and earnings growth are expected to expand rapidly, according to two people familiar with the deal.
About 52 per cent of the net proceeds will be used for financing the company's overseas power projects and 24 per cent will finance transport projects, according to the company's listing prospectus.
China Machinery has projects in countries such as Malaysia, Indonesia, Thailand and the Philippines. The share offer was deferred from the company's original schedule of June 30 because of market volatility, Li Taifang, the company's vice-chairwoman, said yesterday.