| Rail growth plans boost Zhuzhou shares |
| Last Updated(Beijing Time):2006-12-21 11:24 |
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Shares of Zhuzhou CSR Times Electric Co, a Hong Kong-based maker of power converters for trains, surged 74 percent on their trading debut, as investors bet the company will benefit from China's rail expansion plans yesterday.
Zhuzhou's shares closed at HK$9.21 in Hong Kong (US$1.18) after climbing as much as 75 percent. The company raised HK$1.91 billion in an initial public offering, selling 360.6 million shares at HK$5.30 apiece, it said.
China plans to spend 100 billion yuan (US$12.8 billion) by 2020 extending its train network 35 percent, as economic growth drives up rail usage, Bloomberg News reported. Zhuzhou is likely to benefit from these plans because it already has firm relations with the Ministry of Railways, say analysts including Tony Zhu.
"The company has a competitive edge over its rivals because of its government ties," said Zhu, an analyst at SinoPac Securities in Shanghai. "The company will directly benefit from China's economic growth."
Zhuzhou got 46 percent of its sales last year from the ministry and its affiliated agencies, said Zhu, who rates Zhuzhou shares "outperform." The company will probably boost net income to 400 million yuan next year, he added. That compares with a net profit of 211 million yuan in 2005.
Investors have oversubscribed for share sales held by both Gaungshen Railway Co and Daqin Railway Co this year, as rail use in China grows.
Guangshen Rail, the country's second-biggest publicly traded rail operator, raised close to the maximum 10.3 billion yuan sought in a Shanghai share sale earlier this week after investors ordered 44 times the stock on offer.
Daqin Rail, operator of China's largest coal transport line, attracted 553.9 billion yuan of bids from domestic investors in its 15 billion-yuan initial public offering in July.
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