GIC-linked China Minzhong launches IPO

$237m size makes it the largest Chinese IPO in S'pore since global financial crisis

By LYNETTE KHOO

SINGAPORE'S first initial public offering linked to the Government of Singapore Investment Corporation (GIC) has launched its $237 million offer.

China Minzhong, a well-known vegetable producer and processor in China, priced its mainboard offer shares at $1.20 apiece.

The expected gross proceeds of $237 million from 197.34 million shares - comprising 119.6 million new shares and 77.74 million vendor shares - make it the largest Chinese IPO here since the global financial crisis with a market cap of $645 million.

Of the offer shares, some 9.87 million shares are for the public and about 187.48 million shares for placement.

Two cornerstone investors, Prudential Asset Management (Singapore) and Fidelity Investment Management (Hong Kong), will take up up a post-offering stake of 4.7 per cent and 1.2 per cent respectively.

Minzhong, which expects net proceeds of $135.5 million from the new shares, plans to use them for expanding its production and processing capacity, adding farming land, and for working capital. It also hopes to roll out organic vegetables this year.

'We hope to maintain earnings growth for the next five years,' China Minzhong chief executive Lin Guo Rong told BT when he was in Singapore for a roadshow.

Minzhong recorded profit growth over the past three years, with the latest fiscal year registering a 32.5 per cent jump in earnings to 288.1 million yuan (S$58.9 million). Over 80 per cent of its orders came from repeat customers.

Minzhong produces over 100 product types from five processing plants across China. About 70 per cent of its revenue comes from exporting to 26 countries.

One major attraction of this IPO is the GIC link and institutional ownership. GIC holds a 31.2 per cent stake in Minzhong as at April 1, and this will be pared down to 19.2 per cent post-IPO or 16.5 per cent if there is over-allotment.

Olympus Capital holds a 32.2 per cent stake as at April 1, which will be reduced to 19.8 per cent after the IPO or 17 per cent if there is over-allotment.

CMIA Capital Partners and OCBC Capital hold a respective 23.3 and 4.2 per cent stake, which will be cut to 15.5 and 1.6 per cent respectively post-IPO.

GIC, Olympus, and CMIA also hold non-executive board seats at Minzhong.

'We are institutionalised since day one,' said chief operations officer Wang Da Zhang.

He noted that unlike many Chinese companies that appoint a CFO just one year before their IPOs, Minzhong hired a Singaporean, Ryan Siek, as chief financial officer six years ago when the group set its mind on listing here. The finance team now consists of Singaporeans who are based in China to oversee the finance departments of various subsidiary companies.

The outlook for the industry also remains positive, with China expected to remain a major vegetables exporter with an estimated compounded annual growth rate of 12.7 per cent between 2009 and 2012, Minzhong said.

Notwithstanding past scandals surrounding S-chips, Mr Lin said there was no wavering in the decision to list here.

'Whether a company is good or bad is the most important factor, not where it decides to list,' he said. 'If the company is well-managed and well-run, the market will take notice.'

Translating FY09 net profit to earnings per share based on post-offering share capital, Minzhong IPO is priced at 10.9 times.

Mr Lin felt that it is also time for the group to seek a public listing to build up its branding to facilitate expansion and talent retention.

He had earlier dismissed rumours alleging Minzhong's link to a law suit, saying the legal spat between CMIA and a fund it manages - CMIA China Fund II (CCFII) - has no bearing on Minzhong or its IPO.

CCFII owns 28.7 per cent in HFIL, which in turn holds a 20 per cent stake in Minzhong.

In its registered prospectus, Minzhong also mentioned that CMIA's legal counsel Rajah & Tann LLP has informed the company that as of April 7, the legal proceedings have no impact on HFIL's stake in Minzhong or the IPO.

The public offer closes on April 13 and trading is expected to begin on April 15.

JPMorgan is the sole global coordinator and bookrunner for the IPO. Together with JPMorgan, two other joint issue managers, underwriters and lead managers are Kim Eng and Macquarie. OCBC Bank is the co-lead manager and co-placement agent.