Bank of Communications first to float shares (China Daily) Updated: 2005-06-07 08:55
The Bank of Communications (BoCom), China's fifth-largest commercial lender
after the Big Four, will be the first to test the Chinese bank IPOs (initial
public offerings) late this month.
Analysts expect a warm hug from investors despite the lukewarm market
sentiment.
After BoCom, the other two banks, the China Construction Bank and the
Minsheng Banking Corp, are scheduled to go public later this year.
BoCom plans to issue 5.856 billion H shares for a price range of HK$1.95-2.55
(25 US cents -33 US cents) to raise HK$14.9 billion (US$1.91 billion), which is
expected to begin trading on June 23, Bloomberg yesterday quoted an IPO document
of the Shanghai-based bank as saying.
However, Song Feng, a senior official and former spokesman for the bank,
declined to comment, neither did the bank's public relations firm, Citigate Dewe
Rogerson.
According to the quoted document, the price range is 1.3-1.6 times the bank's
estimated 2005 book value and 11.1-14.5 times its 2005 profit forecast.
"I think the price range is at the lower end of market expectations," Donny
Wang, managing director of equity capital markets at Guotai Junan Securities,
said yesterday, claiming that industry watchers expect the offering price range
to be set between HK$2.05 (27 US cents) and HK$2.8 (36 US cents).
He said the recent poor investment sentiment and several huge initial public
offerings on board prompted this low-end offering price.
"Actually the investment atmosphere is still a bit lukewarm in the market,"
Wang said. "It would be a bit difficult to absorb all the big listing activities
at the same time."
The Hang Seng index inched up 0.3 per cent to end at 13,860.55 points
yesterday.
But Wang believed the lower price range would not affect the subscription
spree of BoCom, as it is the first overseas-listed Chinese bank. "The offering
price is not expensive, I think the market response would be quite positive."
He projected the share price will be set between HK$2 (26 US cents) and
HK$2.1 (27 US cents). "The low-end price range can provide more room for upward
share price movement," Wang explained.
KGI Asia Associate Director Ben Kwong projected the offering price will be
set at the mid range of HK$2.2 (28 US cents) to HK$2.3 (29 US cents).
BoCom is expected to fix the price on June 18, according to the quoted
document.
Wang's view was echoed by Michael Chen, a CLSA bank analyst. He said a
cheaper price (than the average Hong Kong-traded bank shares) will increase the
attractiveness of the offering, despite the fact that Chinese banks, with a high
ratio of bad loans, are regarded a risky bet.
As a result of the bank's increasing efforts to get rid of bad assets,
BoCom's ratio of non-performing loans reduced to 2.91 per cent at the end of
last year, much lower than the average 15.6 per cent of the four State-owned
banks.
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