China's Largest Road/Port Builder Sets Price Range for Shanghai IPO


CHINA Communications Construction Co Ltd has priced its initial public offering in Shanghai at 5.4 yuan per share to raise 5 billion yuan (US$794 million) due to weak market sentiment.

It will sell 1.35 billion shares and the targeted proceeds will be 10.43 times its 2010 earnings and 7.68 times its estimated profit in 2011, according to the company's filing to the Shanghai Stock Exchange.

Its offering price represents the lowest price/earnings ratio since domestic market IPO resumed after a 9-month hiatus.

Last month China Communications Construction, the country's largest builder of ports, roads and bridges, scaled back its Shanghai IPO by 75 percent to raise capital in a sluggish market and to fund its purchase of engineering vessels and machinery.

In its initial prospectus to the China Securities Regulatory Commission last year, the constructor planned to sell as many as 3.5 billion shares to raise about 20 billion yuan.

The Hong Kong-listed China Communications Construction, 70.1 percent owned by its parent China Communications Construction Group, estimates its net profit for 2011 will grow by 20 percent to 11.4 billion yuan.

After its Shanghai listing, China Communications Construction will merge with Road & Bridge International Co, another Shanghai-listed subsidiary of CCCG through a share swap.

"The overall market situation is not that good. The brokerage price will be 20 to 30 percent higher than the final listing price," said Xue Mingjie, a transportation analyst with Rising Securities.

If global trade volume remains low in the next few years, it could hurt the company's port infrastructure business, he added.

China International Capital Corporation also noted that the company's business is closely related with macroeconomic trends and its revenue growth is likely to slow down.

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