Cement firm eyes funds for expansion

By Lee Spears  |   2008-6-28  |     NEWSPAPER EDITION

CHINA Shanshui Cement Group, the nation's fourth-largest maker of the construction material, raised HK$1.82 billion (US$234 million) from a Hong Kong initial public offering, according to an e-mail to investors.

The Jinan, eastern Shandong Province-based company sold 650.84 million new shares, or a 25 percent stake, at HK$2.80 each, toward the low end of a range, said the e-mail. That values the firm at HK$7.3 billion, or 13 times its earnings this year as estimated by banks involved in the sale, Bloomberg News said.

The valuation is about 32 percent cheaper than Anhui Conch Cement Co, China's largest producer of the material, underscoring weak demand for new shares in Hong Kong. Shanshui will use the proceeds to expand production lines to help catch up with bigger rivals.

The Hong Kong market's poor performance this year "is absolutely a factor" in the IPO's pricing, said Jay Zhou, a Shanghai-based analyst at SinoPac Securities Asia who covers Chinese cement stocks. "The company has low growth margins because new production lines it acquired last year are operating inefficiently."

Shanshui Cement generated sales of 4.1 billion yuan in 2007, about one-fifth that of Conch.