China's third largest dry bulk shipper, Sinotrans Shipping Ltd, plans to raise up to $1.47 billion from its Hong Kong share flotation thanks to a global shipping boom, sources familiar with the deal said on Sunday. China's unabated demand for the energy and raw materials needed to fuel its galloping economic growth has fuelled strong demand for bulk cargo ships and sent the Baltic Exchange's dry freight Index to a record level. The company, which is the key vessel-owning subsidiary of state-owned Sinotrans Group, kicks off a market roadshow for its IPO on Monday, is offering 1.4 billion shares, or 35 percent of its enlarged share capital, with a price range of HK$7.18-HK$8.18 each, the sources said.
The indicative price range represents a price-to-earnings multiple of 26.9 to 30.6 times the syndicate earnings forecast for 2007 or 12.3 to 14 times the 2008 earnings forecast. The firm also has 7 cornerstone investors for a combined $175 million worth of shares, including China Merchants Group, China COSCO Group, China Shipping Group, Ping An Insurance, Cheung Kong Chairman Li Ka Shing, Henderson Land Chairman Lee Shau Kee and investment firm Citadel.
The sponsors, UBS and BOC International, on average expected the company could increase net profit 15 percent to $137 million in 2007 before more than doubling the figure to $298.5 million in 2008 due to the strong upward momentum of the Baltic Dry Index.
By comparison, China COSCO, is buying its parent's dry-bulk shipping fleet for $4.6 billion, making it the world's largest transporter of resources. It now trades at 68 times 2007 earnings forecast.
Other peers include China Shipping Development and Pacific Basin Shipping Ltd, which trade at 18 times and 11 times prospective earnings respectively.
Sinotrans Shipping will start its Hong Kong public offering on Nov. 12, with a trading debut scheduled for Nov. 23. The Baltic Dry Index has risen more than 140 percent this year and hit a record high on Oct. 29 because of port congestion and changing trade flows through China, but it has since slipped 4 percent from its peak.
Sinotrans Shipping operated 34 core-owned vessels, with 2.2 million deadweight tonnes (dwt), including 26 dry bulk carriers, three single-hulled Very Large Crude Carriers (VLCC) and five small container vessels at end of June.
Analysts expect Sinotrans Shipping's earnings growth could be driven by fleet acquisition.
UBS forecasts the firm's currently 13-vessel order book will require over $400 million in capital expenditure. The company intends to spend up to $1.8 billion in 2007 to 2009 on the acquisition of newbuildings and second-hand vessels.
Shipping is a cyclical business and UBS said an economic slowdown in United States or China would be negative for dry bulk shipping demand growth. Rising dry bulk vessel supply in 2010 may also cause freight rates to fall.
|
