China State Construction Engineering Corp (CSCEC) is looking to raise 50 billion yuan ($7.3 billion) from selling a 40% stake in its A-shares on the Shanghai excahnge. That looks rich. The indicated price is 49-51 times 2008 earnings on a fully diluted basis, high by the standards of the average 27 times historic earnings of Shanghai A-shares, and even by the standards of the big construction groups, which typically sell for 44 times historic earnings.
Tag Archives: IPOs
Despite the slump in global stock markets — even Shanghai is down by 22% from its peak — Chinese railway companies still plan to push ahead with raising new capital from the public.
Bloomberg reports Wang Tongping, a railways ministry spokesman, as saying “We will sell shares once conditions are ripe.” The money is needed to fund a $183 billion expansion of its woefully congested network, which carry a quarter of the world’s rail traffic on tracks that account for only 6% of the global rail network. The network has failed to keep pace with the country’s fast economic growth
Two years ago, the ministry said it wanted to add 17,000 kilometers of track to the system by 2010, which would include building more than 20 new freight and passenger lines, as well as upgrading existing ones so they can carry faster trains, including the new high-speed bullet trains (see: “Bullet Trains Will Cut Beijing-Shanghai Run To Four Hours“). The goal is to expand the network to 100,000 kilometers by 2020. Another goal is to raise rail’s share of freight transport to 90% from the current 35%.
Daqin Railway, which runs China’s biggest coal transport line, raised $1.9 billion in an initial public offering in 2006. China Railway Group, raised money in 2007 and China South Locomotive raised $1.48 billion in August this year.
Amidst the megashare offerings recent and coming to the Shanghai and Hong Kong exchanges, some Chinese companies have been slipping quietly off to Europe.
Xinhua quotes Chris Lu, a managing partner of accountants Deloitte, saying that since 2006 there have been seven initial public offerings by Chinese firms in London, two in Frankfurt and one at the Paris-based Euronext. China Medical System Holdings and China Central Properties were two that listed in London in June, for example. Lu says the purpose of Chinese companies’ listings is to “to build brand awareness and seek new talent aside from raising money”.
The European listings coincide with expanding Chinese direct investment in Europe, which now tops $1 billion a year, or 5% of China’s outbound investment.