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September 23, 2009

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Tourism agency sets price range for IPO

CHINA International Travel Service Corp is seeking to raise as much as 2.6 billion yuan (US$380.7 million) in a Shanghai initial share sale after setting a price range for the offer that most analysts said was in line with expectations.

The company priced the 220 million A shares, or 25 percent of its enlarged capital after the issuance, at between 10.80 yuan and 11.78 yuan, according to a filing with the Shanghai Stock Exchange yesterday.

The range would allow the Beijing-based company, China's biggest tourist agency, to raise 2.4 billion yuan to 2.6 billion yuan. The company earlier said it aimed to raise 1.7 billion yuan to fund a travel network, duty-free shops and other projects.

"China International's IPO comes at the right time because tourism-related stocks are in favor in the run-up to the National Day holiday," said Guolian Securities analyst Wei Chanjuan.

"Still," she added, "other recent new listings have not been very strong."

Leading position

Although some analysts said the price range was a bit on the high side and might damp demand for the shares, others said it appropriately reflects the company's value given its leading position in the domestic market.

Shanghai Securities analysts wrote in a note that it would be reasonable for China International Travel to trade at 30 to 35 times estimated 2009 earnings, and that was in line with the offer price range.

Major tourism stocks in the A-share market trade at an average PE ratio of 40, according to the securities house.

Wei said China International Travel's subscriptions could be affected by many investors shifting funds in advance of the launch of the new Growth Enterprise Market set to open next month in Shenzhen.

She forecast China International Travel could rise 30 percent in its trading debut, while Shanghai Securities is predicting a gain of up to 40 percent.

Twenty-three other IPOs averaged 66 percent gains in first-day trading since China lifted a ban on new share sales in June. Sichuan Express Co tripled its price in its July debut, and Metallurgical Corp of China traded at a premium of 28 percent in its debut on Monday.

China International Travel shares will begin trading after the National Day holiday.


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