Shanghai Electric debuts in HK
HONG KONG: Shanghai Electric, China's leading power generating equipment maker, yesterday made a moderate trading debut in Hong Kong, as investors become picky and cautious amid sluggish market sentiment.
But analysts expressed confidence that the company has the potential to be a market mover in the long run, given China's enormous appetite for power and energy to sustain its economy.
Shares of Shanghai Electric inched up 0.59 per cent above its initial public offering (IPO) price of HK$1.70 (22 US cents), ending its first day at HK$1.71. The stock moved in a narrow range of HK$1.68 to HK$1.72 with 545.45 million shares, worth HK$928.36 million (US$119 million), changing hands.
"The flat performance is in line with market expectation, as investors are being prudent amid the widespread uncertainties in the short-term stock market," Sun Hung Kai Research analyst Niki Chu said yesterday.
Shanghai Electric, which manufactures power generators, elevators as well as packaging and printing equipment, raised HK$5.05 billion (US$647 million) by selling 2.97 billion shares at HK$1.70 each, near the top end of the HK$1.50 and HK$1.76 price range.
Lukewarm market sentiment across Asia is the main reason for the weak reception of the power machinery maker.
Industry watchers said the sluggish debut was also partly due to gloomy speculation about China introducing further measures to cool down the economy and clamp down on illegal electricity projects. Despite that, the company is generally regarded as having potential.
Over the long term, they predicted that Shanghai Electric would trade well.
"Actually Shanghai Electric's business is more diversified and their product quality is higher than its competitors. In the long run, the stock can be a market mover." Chu said.
He expressed bullish views on the mainland's electricity demands and projected that the company will achieve a 20 per cent growth this year.
The closing price values the company at 14 times its 2004 forecast earnings and Chu expects the stock to trade in a range of 14 to 15 times its price to earnings (P/E) ratio over the coming six months.