Beijing-Shanghai High-speed Railway cuts IPO size but is still on track for China’s biggest offering since 2015

Daniel Ren

The operator of the high-speed railway linking Shanghai and Beijing has scaled down the size of its initial public offering (IPO) by 17 per cent, without saying why.

But the IPO, which is expected to net almost 30 billion yuan (US$4.3 billion), could still become mainland China’s largest new share offering since 2015.

Beijing-Shanghai High-Speed Railway said in a filing to the Shanghai Stock Exchange on Wednesday that the IPO volume would be slashed to 6.29 billion shares, down from the previously announced 7.56 billion shares. It did not elaborate.

The company was approved for IPO by the China Securities Regulatory Commission (CSRC) on November 14.

It said the IPO proceeds would be used to buy a stake in the Beijing Fuzhou Railway Passenger Dedicated Line Anhui Company, which is valued at 50 billion yuan.

“The company’s IPO shares will draw huge subscriptions due to its stable earnings growth and its role in the national economy,” said Zhou Ling, a hedge fund manager at Shanghai Shiva Investment.

The price consultation process will end in early January.

Under regulations that could soon be relaxed, companies can price IPO shares at anything up to 23 times their price-to-earnings ratio.

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Based on its per-share earnings of 0.203 yuan after the IPO, that would allow the company to float the 6.29 billion shares at up to 4.66 yuan apiece.

Beijing-Shanghai High-Speed Railway could therefore raise 29.2 billion yuan via the offering, beating Postal Savings Bank of China’s 28.5 billion yuan IPO in early December.

It would be the largest mainland Chinese IPO since the 30 billion yuan issue by Guotai Junan Securities in 2015.

It remains to be seen whether the securities regulator will waive its rule on IPO pricing in time for the giant railway operator.

Beijing is seeking to further liberalise the IPO mechanism to give market players a full play in deciding companies’ worth by introducing a registration-based share sale system.

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As of the end of September, Beijing-Shanghai High Speed Railway, operator of the 1,300km rail line connecting mainland China’s two most developed cities, reported net profits of 9.52 billion yuan on revenue of 25 billion yuan.

In 2018, it earned 10.25 billion yuan, up 13.2 per cent on the year.

The company has just 67 employees who oversee total assets of 187 billion yuan.

The Chinese stock market has enjoyed a fundraising bonanza this year.

So far, 203 mainland companies have conducted IPOs on the Shanghai and Shenzhen stock exchanges, raising a combined 253.4 billion yuan, the highest fundraising value since 2011, according to the Chongqing Economic Times.

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