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China CNR raises $1.2bn with HK listing
From the Financial Times of Fri, 16 May 2014 08:44:35 GMT
high speed train of the new 2,298-kilometre (1,425-mile) line between Beijing and Guangzhou as it waits to start off in Beijing on December 26, 2012. China started service on December 26 on the world's longest high-speed rail route, the latest milestone in the country's rapid and -- sometimes troubled -- super fast rail network. The opening of this new line means passengers will be whisked from the capital to the southern commercial hub in just eight hours©AFP

Trainmaker CNR Corp has raised $1.2bn from its Hong Kong listing, the largest initial public offering in the city from a Chinese issuer in six months.

The company, which makes rolling stock for China’s high-speed railway network, had originally hoped to raise around $1.5bn. It priced shares on Friday at HK$5.17 each, towards the lower end of its initial range, according to two people familiar with the matter.

The deal narrowly tops that of Harbin Bank, which raised $1.1bn in March, and is the largest Chinese deal in Hong Kong since Everbright Bank’s $3.2bn debut in December.

The successful fundraising is a timely boost for Hong Kong’s IPO market, which has lost out on three large share sales this year. In March, Alibaba chose to tap investors in the US after failing to convince Hong Kong regulators to accept its proposed partnership structure.

A month later, AS Watson decided to sell a stake to Temasek rather than brave public markets, while pork producer WH Group pulled its deal, having failed to drum up enough demand. Those two deals combined were initially expected to raise more than $10bn.

CNR said it will use the proceeds from the share sale to repay loans, invest in research and development, buy new factory equipment and expand its clean energy business by building a LNG equipment plant.

China has been investing heavily in its rail network in recent years as it seeks to upgrade thousands of kilometres of track and replace ageing diesel engines with modern high-speed trains. Railway investment was one of the key components of the country’s 2009 stimulus package.

Spending on the sector helped CNR Corp report net profits of Rmb4.22bn (US$677m) last year, up around 10 per cent on the previous year. The company has also had some success exporting its trains, which are now in use in 80 countries worldwide and accounted for 8 per cent of revenues last year.

The company has a listing in Shanghai, where its shares have fallen around 8 per cent this year. Rival CSR Corp has been listed in Hong Kong since 2008. Its stock is down 13 per cent year to date.

Based on current 2014 estimates, CNR Corp will debut at 9 times forecast earnings, slightly lower than the 9.7 times the stock trades at in Shanghai but in line with global peers such as Bombardier, which trades at 9.6 times forward earnings.

In keeping with most recent Chinese deals, CNR signed up cornerstone investors for just under a tenth of the deal to help anchor the public float.

Dongfeng Asset Management, a subsidiary of the Dongfeng Motor, agreed to buy $40m in shares, with a train parts supplier and a state-owned machinery company buying a further $30m of stock each.

CNR hired 12 bookrunners for its deal, high by international standards but low compared with some recent Hong Kong deals. WH Group had a record 29 banks to manage its proposed float.

The banks will divide around $22m in fees, or 1.9 per cent of the deal.

The deal brings Hong Kong’s total raised through IPOs this year to $7.4bn, the fourth highest after New York, London and Nasdaq, according to Dealogic.

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