China Railway surges on HK debut
Updated: 2007-12-07 17:12
Shares of China Railway Group Ltd, the country's largest construction company, surged 46.3 percent on its Hong Kong debut today, as investor enthusiasm in the rail giant kept growing after its high-pitched initial public offering (IPO) in Shanghai.
The stock opened at HK$6.80 on the Hong Kong stock exchange and finished higher at HK$7.36, up HK$2.33 from its IPO price, despite the Hang Seng Index's plunge in the afternoon.
Boosted by the strong Hong Kong debut today, China Railway's A share price also grew a maximum 4.79 percent before closing at 8.44 yuan per share Friday.
China Railway is piloting the dual listing strategy of listing A shares first and H shares second. It managed to float 4.675 billion A shares in the Shanghai Stock Exchange on December 3, raising a total 22.44 billion yuan ($3.03 billion), while the 3.326-billion-share listing in Hong Kong today added another $2.46 billion to the company's value.
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According to an earlier report by China Daily, the country plans to expand its rail network by almost a third through 2020 to carry more people and goods. To meet the goal, a total of 1.25 trillion yuan will be invested in rail construction from 2006 to 2010, according to the Ministry of Railways' five-year plan.
As the world's third largest and Asia's top construction firm, China Railway is widely expected to benefit most from the ambitious plan.
According to the company's recent prospectus, its net profit this year will be no less than 3.14 billion yuan, almost double last year's figure. Its earnings per share will be 0.16 yuan after the two IPOs.
However, some of the figures were recently questioned by a few professionals. According to a report by financial portal Eastmoney.com, an accounting professor claimed that most of the company's profit for the first half of the year came from either withdrawal release or short-term investment. Without these contributions, its profit would have dropped dramatically.
In response, Shi Dahua, board chairman of the company, told Hong Kong media today that the company's financial data are accurate and have been confirmed by the nation's state assets regulator. According to him, the stock prices in both the mainland and Hong Kong markets have so far proven reasonable.
Either way, securities analysts believe there is still huge room for China Railway to lift profit status with business both at home and abroad. In the future, its real estate and mining sector will also contribute a lot to its financial statements.
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