Stocks News
- Rail sector gears up for more stock sales
Date: 31-Jul-2007 Sources: (Shenzhen Daily)
INVESTORS who want a slice of China's sizzling but already pricey railway sector will have more choices with at least five companies, from gear makers to rail operators, queueing up for initial public offerings (IPOs) by next year.
China's nearly US$200 billion spending plan in 2006-2010 to free up notorious bottlenecks in its rail system has created tremendous growth opportunities in the sector but has also lifted stock prices.
'In this sector there are not many to choose from and those that are listed now have probably gone up too much because of the (growth) story,'said Nicholas Yeo, a fund manager at Aberdeen Asset Management.
Rail equipment makers, which analysts expect to be the first beneficiaries of China's 1.5 trillion yuan (US$199 billion) rail investment plan in the current five-year plan to 2010, are trading between 35 times and 108 times forecast earnings in Shanghai.
But the upcoming new listings could open a window for interested buyers.
China's two State locomotive and railway equipment makers, China Northern Locomotive and Rolling Stock Industry (Group) Corp. and China Southern Locomotive and Rolling Stock Industry (Group) Corp., are seeking advice from regulators for a share sale, possible next year, company executives said.
China Northern, a partner of Siemens AG and Alstom, is finalizing detailed plans for an IPO with the sale of domestic A shares on the cards, said a company executive.
Its peer China Southern, which is a partner of Bombardier Inc., is considering whether to apply for a separate listing or inject its assets into one of its listed units, a company executive said.
The company controls Hong Kong-listed Zhuzhou CSR Times Electric and Shanghai-listed Zhuzhou Times New Materials Technology and Shenzhen-listed South Huiton.
China Southern could sell US$600 million to US$700 million worth of A shares as early as the end of this year, a banking source said.
All State-owned railway vehicle manufacturing enterprises in China are owned by China Southern and China Northern, except for those large railway maintenance vehicles owned by Kunming China Railway, analysts said.
The Ministry of Railways has made financial reform of the sector a priority, urging railway operators and equipment makers to list their shares to boost capital and strengthen management.
The ministry plans to issue a 60 billion yuan bond in the third quarter to help fund the massive spending in 2006-2010, doubling such investment from the previous five years.
'China railway equipment is a huge market with significant growth in the next 20 years at least,'Merrill Lynch said in a recent research report.
The ministry's three other units, China Railway Express Co., China Railway Engineering Group and China Railway Construction Group, are also seen seeking to float their shares this year or in 2008 to raise a combined US$4 billion.
China Railway Engineering and China Railway Construction, both planning a dual listing in Hong Kong and on the mainland, may consider abandoning their H-share listing to focus on A shares only, bankers said.
The government has suspended the approval of State-owned companies to issue H shares in Hong Kong since November due to strong demand in the domestic market and amid fears that raising funds from overseas would further pressure the yuan to appreciate, they said.
However, the only Hong Kong-listed mainland railway operator, Guangshen Railway, could continue to underperform the market with slow passenger and freight growth, analysts said.
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