China CNR Corp, one of the country's two big train makers, has priced its A-share initial public offering at 5.56 yuan a share, the top of an indicated range, raising 13.9 billion yuan ($2.04 billion). CNR's IPO, China's fourth-largest this year, attracted 1 trillion yuan in subscriptions, the company said in a filing to the Shanghai Stock Exchange.
CNR, which competes with China South Locomotive & Rolling Stock Corp, is selling 2.5 billion yuan-denominated A shares for listing on the Shanghai Stock Exchange to raise money to upgrade its technology.
It had previously set a price range for the IPO at 5.00 yuan to 5.56 yuan. Mainland companies typically price their IPOs at or near the top of the indicated range, due mainly to strong investor interest in new shares.
CNR joins other Chinese firms in a rush to tap buoyant stock markets this year in the mainland and Hong Kong, while China's regulators are speeding up IPO approvals to boost equity supply as part of an effort to prevent asset price bubbles.
CNR, which also competes with foreign manufacturers such as France's Alstom and Canada's Bombardier Inc to supply trains for the world's fastest-growing major railway market, has hired China International Capital Corp (CICC), Huatai Securities and Huarong Securities to underwrite the IPO. The final IPO price values CNR at 49 times its 2008 earnings on a fully diluted basis, about the same as its rival China South Locomotive's historical price earnings ratio but much higher than the overall Shanghai market's price-earnings multiple of 27.
Analysts have said the high valuations of China's train makers may not be excessive as investors are tapping into the rapid development of China's railway network, which is driving demand for new rail vehicles as well as vehicle upgrades and refurbishment services.
While China is spending heavily on infrastructure for its booming economy, railway investment has generally lagged economic growth this decade. Beijing has budgeted 1.2 trillion yuan for rail investment for 2006-10, more than four times the figure for the previous five years.
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