Sinotrans Shipping Ltd may raise as much as HK$11.45 billion in a Hong Kong initial public offering that has drawn US hedge fund Citadel Investment Group LLC, said sources.
The dry-bulk shipping company plans to offer investors 1.4 billion new shares at HK$7.18 to HK$8.18 each, said the sources, who declined to be identified before an official statement.
The sale may be expanded by another 15 percent to meet demand and stabilize the share price.
The shipping line aims to expand its fleet because surging imports of coal and iron ore in China and India have allowed bulk shippers including Pacific Basin Shipping Ltd and STX Pan Ocean Co to more than double rates over the past year. A lack of shipbuilding capacity is likely to restrain growth in the global fleet, Pacific Basin said last week.
"This is a very good year for dry-bulk shipping and Sinotrans chose the right time to launch their IPO," said Roslyn Ji, an analyst at Core Pacific-Yamaichi International Ltd in Hong Kong. "The global dry-bulk market will continue to prosper over the next three years as demand for commodities is very strong from China and India."
The sale of a 35 percent stake in the IPO values the Hong Kong-based unit of China National Foreign Trade Transportation (Group) Corp, also known as Sinotrans Group, at as much as $4.2 billion, the sources said.
Sinotrans Shipping will use about 80 percent of the sale proceeds to expand its fleet and buy shipping companies, they said. The four-year-old company is adding capacity to meet increasing demand to transport dry-bulk cargos along global trade routes and to carry crude oil from the Middle East to the Asia-Pacific region, especially China, said a report by Daiwa Institute of Research Ltd.
China's economy grew 11.5 percent in the third quarter, increasing its thirst for iron ore, used to make steel, coal and other commodities.