China’s stock regulator will review an application by China’s top shipbuilding company for a stock initial public offering (IPO) worth around $1 billion. This is yet another sign the authorities are boosting share supply to help cool heated stock trading.
If it wins regulatory approval, which seems likely, China Shipbuilding Industry (CSIC) plans to issue up to 2 billion A-shares denominated in renminbi for a listing on the Shanghai Stock Exchange.
In its prospectus, CSIC said it needs around RMB6.44 billion ($943 million) to help it fund production of spare parts for ships, enhance its supplementary shipbuilding business and improve equipment supplies.
The prospectus read, "If this issue raises more funds than needed for the above-mentioned items, extra proceeds would be used to supplement working capital."
Forbes reported that according to Reuters calculations, this IPO will dilute its 2008 earnings per share (EPS) of RMB0.26 to RMB0.182.
If the firm raises RMB6.44 billion on a 2 billion-share issue, its IPO price of RMB3.22 will represent a historical price earnings (PE) ratio of only 18 times.
Such valuations are inexpensive by Chinese standards, especially taking into consideration the company’s leading status in China’s shipbuilding industry.