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Guilin Sanjin sets the China IPO ball rolling
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Institutional and retail investors are waiting to see how the country's first-to-be listed company would perform on the bourses after the regulators lifted a nine-month ban on initial public offerings (IPOs) late last Thursday.

Guilin Sanjin Pharmaceutical Co, which got approval to raise 634 million yuan through an IPO, held its first road show in Beijing yesterday. The fair attracted over 100 institutional investors, including brokers, fund management firms and trust companies.

Guilin Sanjin Pharmaceutical Co, producer of Watermelon Frost throat lozenges, has won regulatory approval to sell as many as 46 million shares in an initial public offering on the Shenhzhen Stock Exchange. [CFP]
Guilin Sanjin Pharmaceutical Co, producer of Watermelon Frost throat lozenges, has won regulatory approval to sell as many as 46 million shares in an initial public offering on the Shenhzhen Stock Exchange. [CFP]

More than 100 offer documents that were piled up at the reception were handed out to the visiting investors and the hotel waiters kept repeatedly asking for more chairs in the meeting room.

"The road show for such a medium-sized company usually attracts around 70 to 80 people. But this road show attracted over 100 people," said Wang Jianzheng, senior manager, China Merchants Securities, the company's main underwriter. "Since it is the first IPO deal in nine months, the rush is understandable," he said.

During the two-hour road show, many institutional investors were seen evincing interest in the company and actively engaged in clarifying their queries.

"The interactions at the road show very really nice and cordial," said Zou Wenxin, manager, colligation department, China Minzu Securities.

The question and answer session lasted for over one hour and had to be concluded due to time constraints. Most of the questions centered on the company's product sales and how it was planning to deploy the funds raised, Zou said.

China Merchants Securities has suggested a price range of 17 yuan and 21 yuan for the company's shares, while its earnings per share is about 0.67 yuan.

"Based on this assumption, the company's P/E (price-earnings) ratio is about 25 to 31 times, while the average P/E of China's stock market is about 30," said Zou adding, "as such, the company's P/E ratio looks reasonable."

Guilin Sanjin will also hold road shows in Shanghai and Shenzhen in the next two days and arrive at the issue price by Friday.

"Institutional investors must be extra vigilant unlike the past as they now need to specify both the price and number of shares while subscribing," Jin Daan, senior manger with China Merchants Securities, said.

Marketmen aver that though the bourse may feel the impact of corrections after IPOs return, some cushion has been provided by the recent government directive of earmarking part of the proceeds from the listing of State-owned enterprises to the national pension fund, primarily to ease market volatility.

Buoyed by the news, the benchmark Shanghai Composite Index rose 0.55 percent to 2896.3 points at close yesterday, the highest since July 28, 2008. The smaller Shenzhen Composite Index sank 0.46 percent, or 51.58 points, to end at 11190.71.

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