ICBC predicts 15% growth in profit

Date Jan 27 2010 14:00:48 Source:Global Times

The Industrial and Commercial Bank of China (ICBC), the world''s largest lender by market value, estimated its net profit in 2009 would reach 110.84 billion yuan ($16.23 billion), up about 15 percent year-on-year, according to a brief statement released by the bank Tuesday.

Also, its earnings per share are estimated to be 0.33 yuan, the bank said in the statement posted on the website of the Shanghai Stock Exchange.

The lender will release the specific figures in its annual report, which is expected to be released on April 1, according to the statement.

"The 15 percent growth is slightly higher than the expectations," Yu Minhua, industry analyst from Haitong Securities said.

Wu Yonggang, analyst from Guotai Junan Securities, estimated previously that the ICBC''s net profit in 2009 would grow 13.3 percent compared with a year earlier.

The lender''s net profit in the first three quarters amounted to 99.91 billion yuan, up 7.7 percent year-on-year.

An unnamed source from the ICBC said that during the six years from 2003 to 2008, the bank maintained a high growth of 37.6 percent on average. And he added that the high growth rate was mainly because the bank had established a relatively diversified revenue structure which lessened the impact of economic fluctuations on the bank''s profitability.

In addition, the bank has stepped up efforts to launch technology and product innovation and improve its service channels and service models, the source added.

 Yu predicted that in 2009, the listed banks could see about 15 percent growth on average in net profit, but the large commercial banks'' growth may trend slightly lower than the average figures and the small and medium-sized banks'' growth may be higher.

Liu Mingkang, chairman of the China Banking Regulatory Commission (CBRC) disclosed recently that the assets of the banking industry in 2009 reached 78.7 trillion yuan and the delinquency rate declined to 1.58 percent.

At the end of the third quarter, Chinese banks'' return on assets and return on capital were 1 percent and 17.8 percent respectively, according to Liu.

Strong economic growth expected in China

Date Jan 27 2010 13:59:36 Source:Global Times
China will see high growth and low inflation this year, making it possible for the country to see one of the best years in decades in terms of economic performance, economists at Nomura Securities said Tuesday at the Nomura Global Economic and Strategy Conference in Beijing.

China''s real gross domestic product (GDP) growth is expected to reach 10.5 percent in 2010, compared with the 8.7 percent growth last year. The consumer price index (CPI) will be around 2.5 percent for the whole year, while last year the figure declined 0.7 percent, forecast Sun Mingchun, chief China economist at Nomura Securities in Hong Kong.

The country''s economic growth will rely more on domestic demand growth, Sun said. Exports made negative contributions to last year''s GDP growth, while the trade surplus over the past year declined substantially.

This year exports will increase around 10 percent while imports are expected to rise about 20 percent, meaning exports will continue to contribute negative points to GDP growth, he predicted.

China will boom this year, not only in investments, but also in consumption, said Robert Subbaraman, chief Asia economist excluding Japan for Nomura Securities in Hong Kong.

The bigger economies, including European countries, the US and Japan, have had weak investment and very little consumption over the past year, while China has seen strong growth in both investment and consumption, he said.

He gave an example: From 2007 to 2009, China saw a $70 billion increase in retail sales while retail sales in the US fell $30 billion.

"China is becoming a lot more important [due to its consumption boom], and is starting to affect the rest of Asia," Subbaraman said.

The global economy will stop declining this year, with emerging Asia, particularly China, expected to lead the recovery, while developed economies are predicted to face post-crisis headwinds, resulting in "a tale of two recoveries," said Paul Sheard, global chief economist at Nomura Securities.

Sheard said the global economy is likely to see 4.2 percent growth, with China contributing 1.5 points to the growth.

If the yen is not to see a sharp appreciation against the dollar, China is likely to overtake Japan as the world''s second largest economy, Sun said. Currently China, with a GDP that reached 33.53 trillion yuan ($4.91 trillion) in 2009, remains the third largest economy in the world.

Nomura''s economists, while showing confidence about China''s economic outlook, also warned of potential risks that might slow its growth.

While booming investment will further drive economic growth, overly loose investment controls will bring problems, Sun said, adding that credit control should be associated with investment control.

If the government tightens credit control while loosening investment control, the private sector might be squeezed out as large projects will take priority in bank lending, Sun said.

Sun, who said CPI inflation will be mild, warned that the producer price index (PPI), expected to see a 6 percent increase this year, will add pressure to inflationary expectations.

Indorama raises $123 million from downsized IPO

Date Jan 26 2010 17:25:04 Source:FinanceAsia

The size of the offering is cut by more than half as the global equity environment deteriorates, but the remaining deal is well-covered.
Indorama Ventures, a Thailand-based petrochemical company focusing on polyester, will become the first company to go public in Thailand since April 2008 after pricing its initial public offering at the bottom of the range.

The pricing came after the company on Friday (the final day of the bookbuilding) downsized the offering from 913.4 million shares to 400 million shares, and raised a total of Bt4.08 billion ($123 million), compared with earlier plans to raise as much as $347 million.

According to sources, the size reduction, which was announced mid-afternoon Hong Kong time, reflected the deteriorating sentiment for equities that led to several days of sell-offs globally. And, as global institutional investors focused on reducing risk, their appetite for additional exposure to an emerging market like Thailand waned somewhat.

However, investors who had already put in orders didn''t flinch even with the additional headwinds and the announcement that the deal would be cut to less than half the initial size - this is a move that can sometimes spook investors and cause them to pull their orders. But according to one source, almost all the investors stayed in the book although some did reduce their orders in proportion to the smaller size.

At the same time as the bookrunners announced the downsizing, they also indicated that the deal would likely price at the bottom of the Bt10.20 to Bt12.60 range and that only 75 million shares, or 18.8% of the total deal, would be available to international investors. The latter was a reflection of the strong demand from domestic accounts, but after a solid inflow of international orders on the last day from high-quality US-based long-only accounts, the bookrunners adjusted the split between the two tranches so that one-third of the deal, or 130 million shares, went to international investors and two-thirds to domestic investors.

Based on the announced size of 75 million shares, the international portion was about five times covered with some investors claiming that they would buy additional shares in the secondary market to compensate for being scaled back in the primary allocation. However, sources said the allocations were skewed towards the top investors, which may limit that impact.

About half of the demand came from the US, while Asia accounted for one-third. European-based accounts made up the remaining 17%-20%. Although Indorama is really a global company that just happens to be based in Thailand, the buyers were primarily funds focused either on this region (Thai and Asean funds) or on emerging markets in general. The sector specialists were few and far between, however.

Part of the aim with the listing is to combine one of Indorama Ventures'' already listed subsidiaries, Indorama Polymers, with the parent company to improve the integration between the two operations and make the group even more efficient in terms of reducing costs and enhancing margins. It will also provide better access to the stock for international investors, many of whom have previously been put off, or restricted, by the limited liquidity.

To achieve this, Indorama Ventures is conducting a simultaneous share swap, offering existing shareholders in Indorama Polymer to exchange their existing Polymer shares for shares in Indorama Ventures. Following the share swap, which will remain open until February 1, Indorama Polymer will be delisted.

With the IPO price being fixed at the bottom of the range, some shares will be moved from the IPO to the share swap as compensation for the lower price. While this won''t have an impact on the IPO since it had been downsized already, leaving plenty of shares available for that reallocation, it means that the share swap, if used in full, will account for 601 million Indorama shares. Together with the IPO this will result in a total free-float of 23% at the time Indorama''s listing -- 9.2% resulting from the IPO and 13.8% from the share swap.

The combined size of the IPO and the swap offerings will be $318 million, which suggests the company will have a market cap of about $1.38 billion at the time of listing. Indorama won''t receive any money from the swap, however. The IPO could increase slightly to a maximum $141 million, if the company makes use of the 15% greenshoe option.

Indorama''s largest business line, in terms of revenue, is polyethylene terephthalate, better known as PET, which is used primarily to make drink bottles. It is also the second largest producer of PET globally. But the company also has two other business lines -- polyester fibre, which is mainly used in textiles and for industrial purposes including conveyor belts and technical fabrics; and purified terephthalic acid (PTA), which is a feedstock that is used for the manufacturing of various other polyester products, including PET.

Part of Indorama''s strategy has been to buy underperforming production assets at attractive prices and then turn them around. This is likely to continue and, according to sources, the management has been telling potential investors that they will be able to double the company''s market value within the next three years. One syndicate research report projects that the company will be able to deliver an Ebitda compound annual growth rate of 48% between 2008 and 2011, by expanding it production capacity -- not through acquisitions but by increasing the utilisation rate at its existing facilities, including a greenfield PET plant that came on stream in the fourth quarter of last year.

The IPO price translates into a 2010 price-to-book multiple of about 1.2 times and a price-to-earnings multiple of 7.1 times for the same year. Both multiples put it at a sizeable discount versus its regional peers, although analysts note that there are no pure-play comps since most of the other global PET players also have other petrochemicals businesses. It is also listing at a slight premium to its Thai peers, which are trading at an average 2010 price-to-book of 1.1 times, according to syndicate research. Analysts argue that this is warranted given Indorama''s greater international exposure and its greater return-on-equity.

Bank of America Merrill Lynch and Morgan Stanley are joint bookrunners for the international portion of the deal, while Bualuang Securities is responsible for the domestic portion. The shares are due to start trading on February 5.

© Haymarket Media Limited. All rights reserved.

IMM mines the Hong Kong IPO market for up to $427 million

Date Jan 26 2010 17:24:15 Source:FinanceAsia

International Mining Machinery (IMM), a Chinese coal mining equipment producer, started bookbuilding yesterday to raise up to HK$3.32 billion ($427 million) in an initial public offering (IPO) in Hong Kong.

The company is offering 520 million primary shares, or 40% of the enlarged share capital, in a price range of HK$4.88 to HK$6.38 per share, which will allow it to raise between HK$2.54 billion and HK$3.32 billion.

The price range represents a price-to-earnings ratio of between 18 and 23.5 times projected earnings for 2010. By contrast, the Hong Kong-listed shares in Sany Heavy Equipment -- IMM''s key domestic competitor -- are trading at 30 times.

IMM and Sany are the leading providers of coal mining equipment in China, with each having a 27% share of the nationwide market. The two companies have many similarities, sources said, but the former has a more diversified product portfolio. IMM also has 50 major customers that are all big state-owned enterprises, while Sany has over 300 customers of varying sizes.

Coal prices, the performance of coal miners and raw material prices are of vital importance to IMM''s profitability, the company said in a preliminary prospectus. China Everbright Research predicts coal prices in China, the world''s largest consumer of the fuel, may increase by 10% in 2010. "That will be good news for coal mining equipment makers," said Nikita Zhang, an analyst at the firm.

As usual, 90% of IMM''s new shares are offered to institutional investors, while 10% have been earmarked for Hong Kong retail investors.

The offering size will stretch to 598 million shares, or up to $492 million, if a 15% greenshoe option is fully exercised. Despite the decent size of the deal, the company has enlisted no cornerstone investors to support the IPO.

The deal, which is arranged by BOC International and UBS, will be priced on February 3 and the trading debut is scheduled for February 10. The institutional bookbuilding will remain open until the pricing date, while the public offering in Hong Kong will run between January 29 and February 3.

Demand was good on the first day, with a good mix of investors having placed orders, people familiar with the deal said.

IMM will use 21% of the net proceeds to repurchase preference shares issued to one of its controlling shareholders in 2006 and 2007 in connection with an acquisition, and 16.5% to pay dividends to pre-IPO shareholders. It will also earmark approximately 30.8% for potential acquisitions and other investments to enhance its production capacity, according to a term sheet. Another 21.8% of the money raised will be used to upgrade production facilities, while the remainder will go towards general working capital.

The company''s revenue increased 24.3% to Rmb873 million ($128 million) in the seven months to July 31 last year, from Rmb702.6 million in the same period a year earlier. Net profits surged 45.8% to Rmb138.4 million from Rmb94.9 million during the same period, according to the prospectus.

And if Sany Heavy Equipment is any guidance, then IMM''s share price could be in for a strong performance too. Sany, the largest manufacturer of roadheaders for coal mining in China, raised $309 million in a Hong Kong IPO in November after selling 500 million primary shares at HK$4.80 apiece. The stock jumped 27% in its trading debut and has been trading at an average price of HK$8.70 in the past two months. Yesterday it closed at HK$8.68, which represents an 80% gain from its IPO price.

Market watchers say IMM beats Sany in terms of product range, because it aligns itself with the consolidation of coal mines in China which is creating a need for individual equipment suppliers to meet a wide range of equipment demands.

Currently, the coal mining equipment industry in China is fragmented. The industry is divided by equipment type, and many large-scale domestic manufacturers only command a leading position in certain types of equipment or product segments. Sany specialises in roadheaders, for example, which are a form of excavating equipment used to make tunnels.

But the restructuring of the coal mining industry also poses a threat to equipment makers. Early last year, the government of Shanxi, which is the largest coal mining base in China, ordered the number of mine shafts in the province to be gradually reduced from over 2,000 to below 1,000 by 2015.

"Smaller coal mines are closing under the government''s order, which will reduce demand for mining devices," China Everbright''s Zhang said.

© Haymarket Media Limited. All rights reserved.

European shares fall on China worries

Date Jan 26 2010 17:20:04 Source:Reuters

LONDON (Reuters) - European shares fell in early trade on Tuesday, extending their decline for a fifth day after China implemented a previously announced clampdown on lending, with banks and commodities the major fallers in Europe.


By 0810 GMT (3:10 a.m. EST), the pan-European FTSEurofirst 300 .FTEU3 index was down 0.7 percent at 1,011.34 points.

Sentiment was knocked after banking sources said China had implemented its latest rise in bank reserve ratios to curb excessive lending.

"Since China has started its banking proposals ... this has generally been seen as a concern," said Justin Urquhart Stewart, director at Seven Investment Management.

"How do you let the air out of balloon easily, the answer is with difficulty ... there is a level of Chinese uncertainty which hangs as a cloud over us."

Banks took the most points off the pan-European index. Banco Santander (SAN.MC), HSBC (HSBA.L), UniCredit (CRDI.MI) and BNP Paribas (BNPP.PA) lost 0.9 to 1.8 percent.

Commodities were under pressure as crude and metal prices retreated on concerns over weaker global demand.

Oil stocks BG Group (BG.L), BP (BP.L) and Total (TOTF.PA) lost 0.5 to 1.1 percent, while miners Anglo American (AAL.L), Antofagasta (ANTO.L), Rio Tinto (RIO.L) and Xstrata (XTA.L) fell 1.5 to 3 percent.

On the upside, German engineering conglomerate Siemens (SIEGn.DE) gained 2.2 percent after it posted first-quarter operating earnings that far exceeded expectations.

(Reporting by Joanne Frearson)