Materials supplier seeks dual-listing as China railway construction speeds up

China Railway Materials Commercial Corp (CRM), a leading provider of railway construction materials and logistic services, plans to raise Rmb10 billion ($1.5 billion) from a dual-listing in Shanghai and Hong Kong next year -- a move seen by analysts to take advantage of Beijing's railway-building spree.

Liu Guoping, vice-president of CRM, said the group plans to complete a company restructuring by the end of August and to offer A-shares in Shanghai and H-shares in Hong Kong in 2011. He announced the plan while attending the Mining & Asia Focus 2010 conference in Shanghai yesterday, according to reports by several different Chinese media. Liu didn't give details on the share sale.

The announcement comes at a time when several major deals are being either cancelled or delayed due to volatile market conditions. The latest Asian issuer to suffer such a fate was Chinese upstream oil company MIE Holdings Corp, which yesterday postponed its already downsized New York IPO. The company was initially due to price the deal last Thursday -- the day the US market plunged close to 1,000 points intraday amid fears about the European debt crisis.

Analysts say if CRM's offering were to happen next year, the company may have very strong pricing power thanks to a potential improvement in market conditions and the Chinese government's aggressive investment in the nation's railway system in coming years. "The country's railways will remain a hot investment [topic] till 2012. Railway builders have received an influx of orders since 2009," said Li Zhirui, an infrastructure analyst at First Capital Securities.

China's investments in its railway system jumped 70% in 2009 and is likely to surge another 16% this year as Beijing injects a total of Rmb700 billion into the railroad network in 2010, according to Li.

The popular dual-listing of China Railway Construction Corp, one of CRM's major customers, may also help attraction attention to a CRM listing. The Hong Kong portion of CRCC's 2008 IPO was 80 times covered by institutional investors and 291 times subscribed by retail investors.