Dairy firm readies IPO as sentiment improves

YuanShengTai Dairy Farm, a Heilongjiang-based producer of raw milk, has started a one-week bookbuilding campaign for its up to US$500 million Hong Kong float on the back of positive sentiment for new shares.

The firm is marketing 1.22 billion shares, or 31.25 per cent of its enlarged share of capital, at an indicative range of HK$2.49 to HK$3.18 each, which translates into a price-earnings ratio of up to 20 times based on next year's expected earnings, according to a term sheet obtained by the .

"The size of [YuanShengTai's] share offering is bigger than expected, with a number of minority shareholders exiting through the listing," a banker familiar with the deal said. "Some pre-initial public offering private equity investors could exit through exercising the greenshoe option if the base-case demand is exceeded."

Under the latest arrangement, about 20 per cent are old shares, while the rest are new.

Bankers said the deal was enlarged from an original US$200 million because of recent institutional demand for dairy stocks after shares of newly listed China Huishan Dairy rose more than 15 per cent from their offer price in September.

Pricing is slated for November 19 and the shares are scheduled to begin trading on November 26.