Hong Kong-listed Dalian Port, the largest port operator in north China, has raised Rmb5.7 billion ($856 million) in a Shanghai initial public offering after pricing its shares at the mid-point of the indicated range.
The pricing suggests that the company is attempting to avoid the weak secondary market performance that has plagued two of its domestic peers since they listed in Shanghai earlier this year by leaving some upside room for its shares.
The company sold 1.5 billion shares at Rmb3.80 apiece, compared with an indicated range between Rmb3.60 and Rmb4. The final price translates into a price-to-earnings (P/E) ratio of 22.2 times, based on the company’s forecast earnings for 2010, Dalian Port said in a statement to the Shanghai Stock Exchange yesterday.
That is a wide discount compared with Ningbo Port and Tangshan Port which fetched valuations of 29.3 times and 32.7 times earnings in their Shanghai IPOs earlier this year.
However, Dalian Port is coming at a premium to the wider A-share market, where stocks are currently trading at an average P/E of 16.3 times, according to J.P. Morgan.
Dalian Port said in its statement that it sold around 738.2 million shares to its parent and controlling shareholder Dalian Port Group, and 761.8 million shares to public investors. After the IPO, Dalian Port Group will own 51% of the Hong Kong- and Shanghai-listed unit, down from 62% before the transaction.
The institutional book was covered and the retail tranche was around 70 times subscribed, according to the statement. This provides the latest evidence that mainland investors are no longer blindly in love with new stocks. Previously, new share sales, especially government-backed ones, would easily be at least 100 times subscribed, but that changed early this year when several large-scale Beijing-backed enterprises failed to raise the maximum amount targeted and fell below the IPO price in their debuts.
The market response to Dalian Port’s A-share sale also contrasted sharply with its H-share IPO in 2006, when the port operator raised $279 million. That sale was very popular -- the retail tranche was 850 times covered -- and the share price jumped 68% on the first day of trading. The stock closed at HK$3.36 yesterday, 30% above the Hong Kong IPO price of HK$2.57.
Dalian Port earlier reduced its A-share issue size by 37.5% from a planned sale of 2.4 billion shares on concerns about the volatile market conditions in China.
The A-shares will start trading on the Shanghai Stock Exchange on November 29. Citic Securities is the sole bookrunner on the deal.
Located in Dalian city, Dalian Port operates the biggest crude oil terminal in the country. It will use the proceeds to acquire assets from its controlling shareholder, including terminals involved in ore, bulk grain, cargo and passenger-related business.
