Sino Construction launches IPO to raise $35.6m

BUILDING construction and civil engineering company Sino Construction yesterday launched an initial public offering of 152,698,000 invitation shares at 39 cents each for a Singapore Exchange mainboard listing.

'The past few years have seen rapid development in Daqing, with urbanisation driving demand.' - Mr Zhao

The issue consists of 100 million new shares and about 52.7 million vendor shares.

The company, based in Daqing - China's largest petroleum production base - plans to raise net proceeds of about $35.6 million. It plans to spend $17.5 million setting up a concrete mixing plant and buying related equipment. The plant is expected to be operating by year-end. A further $10 million of the IPO proceeds will be spent on construction machinery. The balance will be used as working capital.

The IPO consists of 6,398,000 public-offer shares and 146,300,000 placement shares. All placement shares have been fully subscribed. The invitation shares are offered at a price-earnings ratio of 5.85 times based on FY2007 net earnings per share of 6.67 Singapore cents.
The company's revenue increased from 1.1 billion yuan in FY2006 to 1.16 billion yuan in FY2007. Net profit rose 18.4 per cent to 168.5 million yuan (S$33.1 million) for FY2007. As of April 1 this year, the group had a confirmed order book of 1.18 billion yuan.

Sino Construction plans to secure more big jobs with greater contract value to boost its margins and corporate image. For instance, the group has been invited to tender for the Daqing airport and railway station projects. It is also looking at expanding into second-tier Chinese cities and overseas.

Demand for the company's services is expected to be fuelled mainly by rapid urban development in Daqing, the development of an industrial corridor, and government initiatives to attract more foreign investors to Daqing.

Sino Construction's executive chairman and chief executive Zhao Chuan Wen said: 'The past few years have seen rapid development in Daqing, with urbanisation driving demand for commercial and residential projects. The urbanisation phase is still in an early stage, so we feel that there are a lot of opportunities for construction companies like ourselves.'

The public offer closes on June 10 and trading of Sino Construction's shares is expected to start on June 12.