ChiNext's new firms flaunt high valuations
By Winny Wang |
January 8, 2010, Friday
|
Print Edition
Print Edition
DRIVEN by high valuations, the fourth batch of companies to list on China's new start-up board will raise 5.78 billion yuan (US$847 million) through initial public offerings, more than triple the amount they were seeking.
The eight firms launched subscriptions yesterday with a higher average price/earnings ratio of 88.62 based on 2008 earnings, which is above that of the previous three batches on ChiNext, a Nasdaq-style board catering to innovation-driven but cash-strapped small businesses.
The companies, including a toy car maker, an information technology firm and an electronics start-up, will issue 155 million shares in the IPOs to raise 5.78 billion yuan, more than triple the planned 1.65 billion yuan, according to their prospectuses filed to the Shenzhen Stock Exchange.
Of the eight firms, Dingli Communications Corp, a Zhuhai-based wireless network testing equipment provider, had the highest valuation with a P/E ratio of 123.94. It will issue 14 million shares at 88 yuan apiece to raise 1.23 billion yuan, a 480 percent increase from its planned amount.
"Many ChiNext firms have stronger growth potential than companies on the main boards, so they will be overwhelmed by investors," said Zhang Xiang, an analyst at Guodu Securities Co.
But the high valuations of ChiNext companies has sparked concerns in the Shenzhen Stock Exchange, which said on Tuesday that firms raising more funds than planned via IPOs must spend the additional money only in their main business operations. The exchange said its move aims to restrict companies from channeling funds toward high risks investments. The firms must submit plans before they can spend the additional proceeds. They cannot use more than 20 percent of the additional funds to repay debt or for working capital in a single year.
The eight firms launched subscriptions yesterday with a higher average price/earnings ratio of 88.62 based on 2008 earnings, which is above that of the previous three batches on ChiNext, a Nasdaq-style board catering to innovation-driven but cash-strapped small businesses.
The companies, including a toy car maker, an information technology firm and an electronics start-up, will issue 155 million shares in the IPOs to raise 5.78 billion yuan, more than triple the planned 1.65 billion yuan, according to their prospectuses filed to the Shenzhen Stock Exchange.
Of the eight firms, Dingli Communications Corp, a Zhuhai-based wireless network testing equipment provider, had the highest valuation with a P/E ratio of 123.94. It will issue 14 million shares at 88 yuan apiece to raise 1.23 billion yuan, a 480 percent increase from its planned amount.
"Many ChiNext firms have stronger growth potential than companies on the main boards, so they will be overwhelmed by investors," said Zhang Xiang, an analyst at Guodu Securities Co.
But the high valuations of ChiNext companies has sparked concerns in the Shenzhen Stock Exchange, which said on Tuesday that firms raising more funds than planned via IPOs must spend the additional money only in their main business operations. The exchange said its move aims to restrict companies from channeling funds toward high risks investments. The firms must submit plans before they can spend the additional proceeds. They cannot use more than 20 percent of the additional funds to repay debt or for working capital in a single year.
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