Xueda surges 32% after $128m US IPO

New York - Xueda Education Group, the Beijing-based provider of tutoring services for primary and secondary school students in China, surged 32 percent after raising $128 million in its US initial public offering (IPO).

Xueda advanced $3 to $12.50 in New York Stock Exchange trading after climbing as much as 55 percent. The company sold 13.43 million American depositary receipts (ADRs) for $9.50 each after offering them at $7.25 to $9.25, a filing with the Securities and Exchange Commission and a statement showed.

Chinese companies have accounted for 13 percent of the $18.3 billion raised by IPOs in the United States this year, according to data compiled by Bloomberg that excludes closed-end funds and investment companies. Five of the 10 largest gains among companies listing in New York this year have come from China, whose GDP is expanding faster than any other major economy, the data showed.

"The reason investors would be interested in China would be the strong GDP growth," said Wayne Wilbanks, chief investment officer at Wilbanks, Smith & Thomas in Norfolk, Virginia, which manages about $1.7 billion. "It's as much the function of the insatiable demand for emerging market investment and China in particular, and the subsequent jumps that these things are having in the secondary market."

Xueda, which operates 157 learning centers in 44 cities, will use the proceeds to improve infrastructure and develop new products, its prospectus said.

At the midpoint price of $8.25, Xueda would have been valued at 23 times estimated earnings, IPODesktop.com of Marina del Rey, California, said in a report. That is 21 percent less than Ambow Education Holding Ltd and 77 percent cheaper than New Oriental Education & Technology Group Inc, two Beijing-based companies that Xueda cited as competitors in its prospectus, according to the data.

The company's sales in the first six months of 2010 doubled to $77.9 million and surpassed its annual revenue for all of 2009, according to the filing. Profits increased almost fivefold to $11.8 million in the first half.

Goldman Sachs Group Inc of New York led the sale. Each ADR represents two shares of Xueda. ADRs are ownership stakes in an overseas company that are issued by US banks and usually trade on American exchanges.

Three of the five sales from Chinese companies last month climbed at least 36 percent. TAL Education Group, a provider of tutoring services also based in Beijing, jumped 50 percent.

The two best-performing IPOs this year are also from the Chinese mainland companies. JinkoSolar Holding Co, the maker of silicon wafers in China's Jiangxi province, has gained 221 percent since its May listing. HiSoft Technology International Ltd, the Dalian, China-based company that helps businesses outsource software development, has risen 167 percent.

China's economy will expand 9.6 percent next year, according to the Washington-based International Monetary Fund. In the US, where at least 55 companies have postponed or withdrawn IPOs this year, economic growth will slow to 2.3 percent in 2011, the estimates showed.

"If it's China-related, everyone thinks it's just going to go higher," said Ed Butowsky, managing director at Chapwood Capital Investment Management LLC in Addison, Texas.

Demand for offerings from Chinese companies has helped push the amount raised through Asian IPOs to more than $139 billion this year, the most on record, data compiled by Bloomberg showed. The US share of global initial sales dwindled to a record low of 11 percent last month, the data showed.

Xueda was the first of seven companies that had scheduled IPOs this week. They planned to raise a combined $1.02 billion, which would be the most in four months, according to data compiled by Bloomberg.

Bloomberg News

(China Daily 11/04/2010 page17)