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CSCEC likely to make its market debut this week
By Wang Ying (China Daily)
Updated: 2009-07-28 08:13

China State Construction Engineering Corp (CSCEC), which raised 50.2 billion yuan ($7.35 billion) of new capital in the world's largest IPO so far this year, will list its shares on the Shanghai Stock Exchange as early as this Wednesday, analysts said.

Nearly 6 million subscribers have received IPO allotment letters from CSCEC, a significantly higher ratio than earlier IPOs, thanks to the new distribution rules.

Analysts said the large size of the CSCEC IPO has gone down well with punters looking for quick gains planning to sell their allotments in the market at an expected higher price than the subscription price.

"There is nothing new in the excellent subscription rate for CSCEC shares," said Tang Xiao, analyst, Bohai Securities. "Big share issues often provide excellent opportunities for investors to subscribe," he said.

PetroChina's final allotment rate was 1.94 percent, much lower than CSCEC. That was because during its IPO, the Chinese stock market was at its peak, and the Shanghai Composite Index climbed as high as 6,000 points.

"You can imagine how many people have swarmed into the equity market hoping to grab a slice of the buoyant economic growth in the country," said Tang.

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Major institutions expect CSCEC share prices to hover around 5 to 6 yuan on Wednesday trading, gaining 20 to 40 percent from the subscription price of 4.18 yuan.

Zhang Xiang, industrial analyst, Guodu Securities, said he expects CSCEC to have a price per earning of 0.16 yuan and 0.20 yuan for 2009 and 2010 respectively. Property sector contributes more than half of this, or 0.085 yuan and 0.11 yuan in 2009 and 2010.

According to Tang, premium blue chips like CSCEC will stimulate the capital market and help stabilize the fluctuation and improve the market structure.

"From the heavy subscription of its IPO, we can see that market welcomes quality shares with good future and investment value," Tang said, adding that he believed CSCEC will not let down its subscribers when it is listed on the Shanghai bourse.

"On the one hand, CSCEC will benefit directly from the 4-trillion-yuan stimulus package in terms of massive construction work. On the other hand, most investors and institutions predict with China's economic recovery, business income and net profit of CSCEC should go up substantially," he said.

Market observers said judging from a fundamental point, shareholders of CSCEC are more than confident about a bullish performance from the company. Currently, the evaluation of A shares has returned to normal levels, and there is room for the shares to rise further. In addition, the adequate credit line will not contract in the short term, while the good market liquidity will continue to shore up share prices.

"The mega CSCEC issue is just one of the heavyweights floating in the market," said Xie Wenjie, analyst, Anjian Securities.

CSCEC is the world's largest residential developer and China's largest property construction builder. In 2008, it signed property construction contracts worth 246.6 billion yuan, while its profit touched 160.6 billion yuan.

CSCEC's major business includes building projects, infrastructure construction, property development and investment, design and research. Among these, 80.50 percent of its earnings made in 2008 were from building projects. Building projects and property development, and investment accounted for 42.17 percent and 48.60 percent of its profit last year.

By the end of June, CSCEC had nearly 23.73 million sq m of land plot reserves in 22 major cities in China including Hong Kong.

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