Ningbo Port priced its Shanghai IPO shares at the top of an indicative range on Wednesday, raising 7.4 billion yuan ($1.1 billion), after the Chinese port operator slashed the size of its float by a fifth to whet investor appetite in a wobbly stock market.
Demand for China’s third-biggest initial public offering so far this year was also bolstered by optimism that a rebound in the global economy and trade from 2009’s slump will help boost Ningbo Port’s earnings this year by at least 20 percent.
“We expect the global economy to continue to recover, while a reduced IPO size will make Ningbo Port shares more attractive,” said Zhang Qiusheng, analyst at Galaxy Securities, who forecast the company’s profit would rise 21 percent in 2010.
Ningbo Port, which is owned by the local government, said in an exchange filing that it had priced its offering at the top of the 3.18 yuan-3.70 yuan range, valuing the company at 29.3 times its 2009 earnings on a diluted basis.
The shares may rise as much as 16 percent to 4.3 yuan after listing, based on average valuations of listed ports in China, Zhang said.
Ningbo Port, which competes with Tianjin Port and bigger rival Shanghai International Port , is taking advantage of a recovery in the global economy to raise money in Shanghai for expansion, with plans eventually also to sell shares in Hong Kong.
The company’s net earnings grew 38 percent from a year ago to 1.11 billion yuan in the first half of 2010 due to increased shipments of key raw materials such as iron ore, coal and crude oil into China as well as higher export growth. That compares with a profit growth of 3 percent in 2009.
Ningbo Port, whose shares will trade under the stock market symbol “601018” , has not yet announced a date for debuting on the Shanghai Stock Exchange.
In a sign of pragmatism in a stock market still struggling to stand on its feet after a slump in the first half, Ningbo Port cut the size of its offering by 20 percent on Sunday, saying that it would sell up to 2 billion yuan-denominated A-shares, compared with with a previous target of up to 2.5 billion shares.
The downsizing will decrease share supply, ease the impact of earnings dilution and benefit investors, Board Secretary Huang Weiping told investors in an online roadshow on Monday.
China’s stock market <.SSEC> has lost nearly 20 percent this year on worries of economic tightening and concerns over massive fundraising by Chinese lenders.
The Ningbo Port share sale, which got regulatory approval three months ago, had been put on hold to allow for the two bigger IPOs—Agricultural Bank of China’s $22.1 billion Shanghai-Hong Kong dual listing and China Everbright Bank’s $3.2 billion offering.
Ningbo Port, whose major customers include Danish shipping group A.P. Moller-Maersk and Chinese oil giant Sinopec , will use the IPO proceeds to add capacity.
Chairman Li Linghong, a government official-turned-executive, said on Monday the company would need to add two container terminals each year for the foreseeable future to keep up with demand.
Headquartered in the ancient Chinese port city of Ningbo, the company has said it would also seek to sell 2.35 billion Hong Kong-traded H-shares, or a 15 percent stake, at prices not lower than its Shanghai-traded A-shares, but hasn’t given a timetable.
Combined profits at China’s listed ports dropped nearly 20 percent in 2009 due to a slump in international trade, but the sector is benefiting this year from a global trade recovery that helped propel China’s trade volume to record levels in the first half of 2010.
China’s exports rose 34.4 percent in August from a year earlier while imports leapt by a bigger-than-expected rate of 35 percent during that period.
Ningbo Port expects at least 10 percent growth in its profit this year, the company said this week.
The issue has been underwritten by BOC International. (Reuters)