China State Construction Engineering Corp (CSCEC) said on Monday it had fixed a price range for its Shanghai initial public offering (IPO), looking to raise as much as 50.16 billion yuan ($7.34 billion).
The 12 billion yuan-denominated A shares, or 40 percent of expanded capital, will be priced in the range of 3.96 to 4.18 yuan per share, the country's biggest home builder said in a filing to the Shanghai Stock Exchange, www.sse.com.cn.
The price range will allow CSCEC to raise between 47.52 billion yuan to 50.16 billion yuan, which would make it the biggest IPO so far this year globally and one of the five biggest IPOs in Chinese history.
CSCEC, controlled by the Chinese central government, has said it needs at least 41 billion yuan to develop its traditional residential property projects, build infrastructure, buy equipment and supplement working capital.
CSCEC is one of a slew of firms to have received the go-ahead for IPOs since the China Securities Regulatory Commission resumed IPOs last month. China's stock market has risen nearly 80 percent so far this year, due in part to ample liquidity in its market system, which has been propelled by huge new bank lending.
The government has been quietly fine-tuning its relatively loose monetary policy adopted late late year.
While the stock regulator is adding equity supplies, China's central bank has also pushed market interest rates higher in the past three weeks for the first time this year and resumed issuing key one-year bills in its regular open market operations to help drain liquidity.
Analysts said high price earnings (PE) ratio set by the CSCEC for its IPO might dampen demand for the IPO shares. CSCEC said its A-share price range represented 49 to 51 times 2008 earnings on a fully diluted base after the IPO.
The average historical PE ratio of China's about 15 listed construction and engineering companies is now at around 44 times, according to Reuters Research.
The average PE ratio of the Shanghai's A shares is about 27 times against 2008 earnings, which is already almost double Hong Kong's 14 times.
Though CSCEC enjoys a leading position in China's construction industry, the PE that it set for its IPO share is far above the average of about 30 times for most Chinese IPOs and may be an excess, analysts said.
CSCEC said it would sell 30 percent of its A share offer to institutions and the rest to retail investors. The ratio may be shifted in favor of the retail tranche if demand proves strong.
The company will take institutional subscriptions on Tuesday and retail subscriptions Wednesday. Money will be returned to unsuccessful applicants on Thursday for institutions and July 27 on Monday for retail investors.
The company hopes to list on the Shanghai Stock Exchange as soon as possible after the IPO, but it did not give a firm date.
(Editing by Karen Foster)