Pork producer Huisheng International aims to raise up to HK$246 million ($31.7 million) this month with an initial public offering of shares in Hong Kong.
The company, one of the largest pork suppliers in the south-central Hu’nan province of China, is targeting a February 27 listing date, with 120,000 shares on offer priced at between HK$1.45 and HK$2.05, according to a term sheet.
Huisheng's senior management started a one-week roadshow on February 14 and are meeting with Hong Kong institutional investors, a person close to the deal told FinanceAsia.
The estimated net proceeds if the offering prices in the middle of its current pricing range will total HK$135 million. Huisheng plans to use HK$63.5 million (47%) to purchase freezer storage facilities in a new production base in the Changde Economic and Technological Development Zone in Hu'nan. It will also allocate HK$49.2 million (36.5%) to construct a new breeding farm in Wuxihe Xiang and HK$22.3 million (16.5%) for a breeding farm in Dingjiagang Xiang.
Huisheng’s operations span hog slaughtering, hog breeding and hog farming.
Mainland government officials have undertaken a number of policy initiatives recently to help eliminate slaughterhouses with a low production capacity, raise quality standards, consolidate the industry and support large modernised slaughterhouses, in keeping with the National Pig Slaughtering Industry Development Plan (2010-2015).
These policies should in theory benefit companies such as Huisheng, which aims to boost its slaughtering capacity by 39% by the end of 2014.
At the moment, Huisheng’s Wuling slaughterhouse has a maximum slaughtering capacity of 720,000 hogs per year, while its carving operation has an annual capacity of 12,600 tons of pork products.
However, the company is now constructing a new slaughterhouse in the Changde Economic and Technological Development Zone, which should boost its annual slaughtering production capacity to 1 million hogs and carving production of 30,000 tons of pork.
Huisheng also aims to boost its breeding production, which stands at 50,000 piglets per year. In November, the company started a trial run on its recently completed breeding farm in Linli County, with annual piglet production totaling 43,000. And Huisheng plans to construct three new breeding farms with a combined hog output capacity of 110,000 piglets annually.
Customers include retail shops, supermarkets, pork traders for wet markets, pork product traders and food processing factories.
Chinese pork demand
Demand for pork in China is unquestioned. The swelling middle class has led to a steady rise in pork consumption and it remains the country's most popular meat.
But a number of events – namely last March’s Jiapingtang River disaster where 16,000 dead pigs were found floating in the river – have heightened awareness of food safety issues in the country. This has put pressure on producers to focus on strict quality control throughout the whole supply chain, from breeding, farming and slaughtering to the final production processes.
“China’s per capital spending on meat, poultry and processed products has been growing rapidly in recent years, along with the increasing consumer awareness of food safety,” said Ding Biyan, chairman and executive director at Huisheng International.
Huisheng has “been maintaining strict quality control through its operation”, and has internationally recognised quality assurance accreditations for quality management and food safety, the term sheet said.
The company’s focus now is to “seize opportunities in the hog industry’s consolidation by expanding our farming capacity as well as slaughtering and processing capacity”, Biyan said.
Cinda International Securities is acting as the global coordinator, bookrunner and lead manager of the Huisheng IPO, while Cinda International Capital is the lead sponsor.
