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Home Appliance Retailer IPO Scheduled

Suning Appliance Chains Group Co Ltd, one of China's largest home appliance retailers, will launch an initial public offering (IPO) on July 7 to strengthen its core business, Saturday's China Daily said.

The company will issue about 25 million A shares to secondary market investors, which equals more than a quarter of its total share, according to the prospectus published on Friday.

Suning's share is priced at 16.33 yuan (US$1.97) per share with a price/earnings ratio of 16.33.

The Nanjing-based firm is expected to raise 394.57 million yuan (US$47.65 million) from the IPO.

The proceeds raised would be used to expand Suning's retail chains and improve its logistics and information systems, including six major projects, with a total investment of 410.80 million yuan (US$49.6 million).

The six projects are expansion of Xinjiekou store in Nanjing, investment increase in Beijing Suning Appliance Co, Zhejiang Suning and Shanghai Hongkou Suning respectively, the first-phase of its logistics expansion project, and the construction of its business information system.

Through these projects, the company expects to further expand its business scale and promote its core competitiveness, the prospectus said.

"The Suning IPO would be attractive to investors," said Zhang Bing, an industry analyst from the CITIC securities.

He expects that the share price would rise about 50 per cent when trading starts and the price/earnings ratio would increase by 35 to 40 times.

Established in 1996 and with net assets of 200 million yuan (US$24 million), Suning now operates some 80 outlets in 24 provinces and municipalities, with a sales volume of more than 12 billion yuan (US$1.5 billion) last year.

The retailer said earlier that it would enter a fast-growing period as of this year and aims to open 100 new chain stores and achieve a sales volume of more than 20 billion yuan (US$2.4 billion).

"The listing on the stock market is important for Suning's future development," said Zhang Bing from the CITIC Securities.

With a large sum of funds raised through the stock market, Suning is able to further expand and grow stronger to compete with its major rivals like Gome and Dazhong, which currently are advantageous over Suning, he said.

According to a ranking list of chain stores published by the Ministry of Commerce earlier this year, Suning ranked seventh in the domestic market.

While its major rival Gome Home Appliance ranked third, with a sales volume of nearly 18 billion yuan (US$2.17 billion) in 2003, and a total of 139 outlets.

Analysts said domestic home appliance retailers are competing in business expansion and trying to secure more market shares, in a bid to survive when facing foreign big players when the Chinese Government fully opens the market next year.

At the same time, seeking a public listing is the best way to raise funds for business expansion at a low cost.

China's largest home appliance retail chain Gome gained a Hong Kong listing via a US$1 billion stock and bond swap with its sister firm China Eagle Group last month.

Tiantong Securities was appointed as the lead underwriter for Suning's IPO.

The IPO road show will be carried out next Tuesday and Suning shares will start trading at the Shenzhen Stock Exchange as soon as possible after the IPO.

(China Daily July 3, 2004)

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