|
|
| China BlueChemical Surges On HK Trading Debut |
| News Archive - Oil, Gas & Petrochemicals - September news | |
|
(ChinaOilWeb,Sept 29, 2006) Shares of fertilizer maker China BlueChemical Ltd. (3983.HK) rose as much as 25% on their Hong Kong debut Friday, amid China's strong demand for chemical fertilizers and on expectations prices in China's fertilizer sector will be deregulated. At the end of the Hong Kong market's morning session, at 0430 GMT, BlueChemical was at HK$2.30, up 21.1% from its initial public offering price of HK1.90. It opened at HK$2.30, and traded between HK$2.22 and HK$2.38. "We are very happy (about the share price)," Chairman Wu Mengfei told reporters at the company's listing ceremony. "We will try to grow further... Acquisitions will be one of the major ways to develop our business," he said, but didn't identify any takeover targets. Chief Executive Officer Yang Yexin also said earlier this month that BlueChemical may buy smaller peers, mainly domestic entities, to boost its capacity. The chemical fertilizer company, a unit of oil major China National Offshore Oil Corp., raised US$342 million from selling 1.4 billion new shares priced at the top of the indicative range. The offering attracted strong demand, with the retail tranche, originally 10% of the offering, 352 times covered, a person familiar with the deal said earlier. Because of the strong response, the retail portion of the offering was raised to 50% of the total. The institutional tranche, originally 90% of the offering, was about 60 times covered, the person said. The IPO shares were priced at 9.7 times the company's forecast 2006 earnings, much lower than peer Sinochem Hong Kong Holdings Ltd.'s (0297.HK) current price/earnings ratio of almost 20 times. Solid Fundamentals "(BlueChemical) is a good stock with solid fundamentals," said Francis Lun, general manager at Fulbright Securities. "It's a stock for long-term investors, not for punters." BlueChemical's main product is urea, a natural gas-based fertilizer. The company has a production capacity of 1.84 million metric tons of urea a year. It also plans to expand into methanol and thermoplastic production. The company sources natural gas as a feedstock from an offshore gas field in South China Sea owned by its sister company, CNOOC Ltd. (CEO). The natural gas sale agreements between the two will last until 2023, and the prices were fixed several years ago when gas prices were lower than today. BlueChemical plans to distribute 20% to 30% of its net profit to shareholders as dividends, the company said in its listing prospectus. It expects its 2006 net profit to rise at least 55% to CNY1.46 billion, from CNY943.8 million in 2005. Yang said recently the price of chemical fertilizers in China could be boosted as Beijing is considering giving farmers direct subsidies for their fertilizer purchases, and scrapping decades-old price controls on the products. Beijing has kept the domestic sales price of chemical fertilizers low to shield the country's huge farming population from inflation and to maintain the status quo. It has pledged to eventually liberalize price controls, but hasn't given a timetable. Some analysts are cautious about the pace of price liberalization. "I don't expect Beijing will cancel the price control shortly, because the policy is related to the agricultural sector, it needs to be done very carefully," said Gideon Lo, an analyst at DBS Vickers. Norway's Yara International ASA (YAR.OS) became a strategic investor in BlueChemical by buying 10%, or 140 million shares, of the IPO. A further 28% was sold to four corporate investors: Bank of China Ltd. (3988.HK); tycoon Lee Shau-kee, chairman of Henderson Land Development Co. (0012.HK); mid-tier property developer Chinese Estates (Holdings) Ltd. (0127.HK); and China Cinda Asset Management Corp. Chairman Wu said BlueChemical isn't planning an A-share listing on a mainland China stock exchange at present. The company had received approval from the China Securities Regulatory Commission in 2004 to list on a mainland bourse, but new listings in China were halted for a year from around May last year for nontradable-share reform. JPMorgan Chase & Co. (JPM) and UBS AG (UBS) were the advisers and underwriters on the company's Hong Kong IPO. source:ChinaOilWeb |
|