Xinao hopes IPO will be a gas

Led by ABN Amro, gas distributor Xinao Gas is hoping to raise up to $37 million from the transaction, which is scheduled to close around April 11. In a reflection of the depressed state of the Hong Kong retail market, however, there will be no public offering for the 180 million share deal, which also numbers CLSA as co-lead and BNP Paribas Peregrine as senior co-manager.

The price range has been set at HK$1.15 ($0.15) to HK$1.59 per share, representing a P/E ratio of eight to 11 times prospective 2001 earnings and a relatively high EV/EBITDA ratio of 6.2 to 8.1 times prospective earnings. Observers report positive pre-marketing feedback for the transaction subject to discount pricing against comparables, currently trading on a P/E range of about 13 to 15 times prospective earnings.

Xinao is part of a Cayman's Island company comprising three Sino-foreign joint ventures. The Hebei-based company re-sells gas from its investment in 400km of gas pipeline across Liaoning, Hebei, Shandong and Hubei provinces.

Observers say that the company is poised to benefit from a government drive to accelerate the use of natural gas over the less environmentally friendly oil. The PRC currently utilizes less than 40 billion cubic metres of gas per annum, but hopes to expand the amount to 111 billion by 2010 and 160 billion a decade later.