New | China Railway Signal & Communication raises HK$10.8 billion in IPO at bottom of price range

Investors will closely watch the trading debut of China Railway Signal & Communication (CRSC) today, after the first billion-dollar public offering since the market rout priced the stock at the bottom end of the indicative range.

CRSC, China's dominant provider of railway and urban transit control systems, raised HK$10.8 billion at HK$6.30 per share, despite a head start in fundraising with a solid commitment by cornerstone investors to take 68.3 per cent of the shares on offer.

The price gives CRSC a valuation of close to 22 times earnings, higher than peers China Railway Rolling Stock Corp and Zhuzhou CSR Times Electric, which trade at 14 and 17 times consensus earnings respectively.

"The management's expectation was too high. When the IPO kicked off in April, comparable stocks such as CSR and CNR were trading at sky-high levels. But the market value has halved since the merger," said an analyst at one of the bookrunner banks who did not want to be identified.

Only 54 per cent of the offering to household investors found buyers and the rest was reallocated to institutional houses, which snapped up 97.3 per cent of the total book. The cold shoulder from retail investors was "understandable", said the analyst, as all blockbuster IPOs this year have fallen below their offer prices after the market turmoil in June.

CRSC is Hong Kong's fourth-largest IPO this year, after Huatai Securities, GF Securities and Legend Holdings, according to Dealogic. The other three were trading far below their offer prices yesterday, with both Huatai and GF more than 20 per cent under.