Sinohydro aims to raise $2.3b in Shanghai IPO

Updated: 2011-09-26 16:24


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Sinohydro Group, China's largest builder of dams, aims to raise as much as 14.4 billion yuan ($2.3 billion) in Chinese mainland, lowering its initial fundraising target amid weak market sentiment.

It will be the largest mainland IPO so far this year, which has been dominated by much smaller deals. The state builder said on Sept 25 it will sell 3 billion yuan-denominated shares, compared with up to 3.5 billion shares planned initially.

The builder of the Three Gorges Dam, the world's largest hydropower project, has set a price range of 4.50-4.80 yuan a share for the issue, Sinohydro said in the statement to the Shanghai Stock Exchange.

The price range, which translates to 15-16 times 2010 earnings, was in line with expectations.

CICC pegged the fair value of Sinohydro, which will trade on the Shanghai exchange as, at 4.3-5.8 yuan a share.

Hong Yuan Securities pegged the fair value of the company at 5.0-6.3 yuan a share and recommended clients subscribe to the shares at 4.25-5.36 yuan a share.

The company needs 17.3 billion yuan ($2.7 billion) to buy new equipment, supplement working capital and fund four clean energy and infrastructure projects, including one in Cambodia, it said in a prospectus.

It will be the first major deal in mainland' IPO market this year, which has been dominated by small deals, since wind turbine maker Sinovel Wind's 9.5 billion yuan offering in January.

China's stock index is hovering near a 14-month low as growth in the world's second-largest economy slows amid worries that the debt crisis in Europe will hit global demand.

The benchmark Shanghai Composite Index markets index SSEC has fallen 13 percent so far this year. Shares of China Gezhouba Group, which competes with Sinohydro, have dropped 25.5 percent this year.

China has budgeted 2 trillion yuan for hydropower and water infrastructure projects over the next five years.

"Sinohydro is the biggest beneficiary of China's efforts to step up investments on hydropower and water infrastructure," said CICC analysts Zhang Song and Wu Huimin in a research report last week.

The company controls more than two-thirds of the Chinese dam market.

As part of an overseas expansion drive, Sinohydro has taken on projects in Malaysia, Sudan, Laos and Ghana, the company said on its website.

It is also involved in other infrastructure projects, including the Beijing-Shanghai high-speed rail link, according to the website.

Sinohydro Corp posted operating revenue of 101 billion yuan and net profit of 2.91 billion yuan in 2010.

China Securities Co and Bank of China International are the lead underwriters for the listing.