MCC's IPO thinned by weak demand
Updated: 2009-09-18 08:22
(HK Edition)
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HONG KONG: Metallurgical Corp of China (MCC) priced the Hong Kong portion of its initial public offering at the lower end of an indicated range, sources said yesterday, as the IPO's mammoth size and the construction and engineering sector's weak profit margins appeared to have dampened demand for the building and engineering company.
Still, MCC managed to raise $2.34 billion in Hong Kong's biggest IPO so far this year, after raising slightly more in Shanghai last week for total proceeds of $5.12 billion.
The dual-listed stock is the second-largest IPO in the world this year, behind China State Construction Engineering Corp's $7.3 billion offering. The last time offerings this size rolled through global stock markets was more than two years ago.
MCC's final price means Hong Kong's market has raised $3.47 billion in the last 24 hours alone, with Sinopharm pricing its H-share IPO late on Wednesday.
The China Securities Regulatory Commission lifted a 10-month ban on new IPOs in July, ending a prohibition aimed at propping up the country's two stock markets amid the global financial crisis.
The Shanghai bourse came roaring back this year, rising 87 percent in January-July.
But the benchmark Shanghai Composite Index (SSEC) then slumped 21.8 percent in August, its second-biggest monthly loss in 15 years.
The market has since stabilized, in part from government reassurance it will not tighten monetary policies.
Beijing-based MCC sold 2.87 billion Hong Kong shares at HK$6.35 each, versus a previously indicated range of HK$6.16 to HK$6.81, said the sources, who were familiar with the issue but not authorized to speak publicly about the deal.
"Partly due to its large fund-raising size, it's difficult to have impressive oversubscription," said Li Kwok-suen, a fund manager at Phillip Capital Management. "Also investors might rather pick Sinopharm, which has more attractive selling points."
He said Sinopharm, the largest pharmaceutical products distributor on the mainland, appeared to have better prospects, given the medical sector's fast growth on the mainland.
MCC's construction and engineering sector has grappled with lower margins as the property market rebounds, but not at the boom levels seen two years ago.
MCC sold 3.5 billion shares last week in Shanghai at the top end of an indicated range, raising 18.97 billion yuan ($2.78 billion), although the range was lowered during the roadshow, according to people familiar with the matter.
MCC said its foreign competitors are mainly metallurgical equipment companies such as Siemens VAI, SMS Group and Danieli & Compagnia Officine Meccaniche SpA, which have certain advantages in terms of technology, capital resources and management experience.
In its prospectus, MCC said 2008 revenues rose 26 percent to 157.9 billion yuan ($23.14 billion), while profits fell by a fifth to 6.7 billion yuan ($981.7 million).
Reuters
(HK Edition 09/18/2009 page3)