http://www.reuters.com/article/idUSSGE60S0AB20100129?type=marketsNews
SouthGobi drops sharply on Hong Kong debut
* Analysts say valuation much higher than peers
* Chief executive said expected stock to open down (Adds CEO comment, details)
By Kennix Chim and Joseph Chaney
HONG KONG, Jan 29 (Reuters) - Shares in Canadian coal miner SouthGobi Energy Resources Ltd (1878.HK)(SGQ.TO) fell about 12 percent in their Hong Kong debut on Friday, hurt by the stock's overly high valuation and poor timing.
SouthGobi, which raised $439 million in its IPO, is the second company to list in Hong Kong in 2010 after Russia's UC RUSAL (0486.HK)(RUSAL.PA). Both trade at double-digit percentages below their offering prices. [ID:nTOE60Q020]
Worries about monetary policy tightening in China have pressured stock markets in Asia, hurting initial public offerings both in Hong Kong and on the mainland.
On Thursday, shares of power transmission equipment maker China XD Electric (601179.SS) also fell below their IPO price in their Shanghai debut, the market's worst debut since 2006, underscoring poor investor sentiment. [ID:TOE60QAJ]
SouthGobi, also listed in Canada, fell as low as HK$105.6 in early trade in Hong Kong and by 0700 GMT were quoted at HK$108, compared with its IPO price of HK$126.04.
"Peers have fallen by about 15 percent since -- where it's trading now, we are quite happy. We expected it to open down because it's a soft market," SouthGobi President and CEO Alexander Molyneux told Reuters.
Hong Kong's benchmark Hang Seng Index .HSI has dropped 7 percent this year. Coal miners have been weak, with China Shenhua Energy (1088.HK) down 15.7 percent since SouthGobi started its IPO roadshow on Jan. 11.
Analysts also noted SouthGobi's valuation was much higher than its peers and the company had suffered losses in recent years, though they expect a turnaround from this year.
SouthGobi, owned by Canada-based Ivanhoe Mines (IVN.TO) (IVA.AX), is valued at 51.6 times and 21.3 times 2010 and 2011 estimated enterprise value to earnings before interest, tax, depreciation and amortization (EV/EBITDA), respectively, according to BMO Capital Markets.
By comparison, China's largest coal producer China Shenhua Energy trades at 9.8 times 2010 estimated EV/EBITDA and 8.7 times for 2011. Coking coal producer Hidili Industry (1393.HK) is trading at 14.4 times and 9.2 times 2010 and 2011, respectively, according to Citigroup research reports.
SouthGobi sold 27 million new shares, about 16.8 percent of its enlarged share capital, and secured Asia's top sovereign wealth funds, China Investment Corp [CIC.UL] and Temasek Holdings [TEM.UL] as cornerstone investors, each subscribing to $50 million worth of shares with a six-month lock-up period.
Citigroup (C.N) and Macquarie (MQG.AX) handled the deal.
Of the offered shares, 64.5 percent were allocated to institutional investors, 25.5 percent to Hong Kong retail investors and 10 percent to Canadian investors.
MONGOLIA EXPANSION
The company said it was focused on expanding its coal production capacity in Mongolia, centred around its Ovoot Tolgoi mine 40 km from the border with China.
Since the start of production at the mine in late 2008 until the end of September 2009, the company sold about 1.1 million tonnes of coal, SouthGobi said, adding it planned to eventually extract 8 million tonnes of metallurgical and thermal coal per year for Ovoot Tolgoi from 2012.
SouthGobi reported a $41.7 million net loss in January-September versus a year-earlier net loss of $52.6 million, due to substantial start-up mining costs.
It has forecast a 2009 net loss of no more than $111.2 million. (US$1=HK$7.75)gl
SouthGobi drops sharply on Hong Kong debut
* Analysts say valuation much higher than peers
* Chief executive said expected stock to open down (Adds CEO comment, details)
By Kennix Chim and Joseph Chaney
HONG KONG, Jan 29 (Reuters) - Shares in Canadian coal miner SouthGobi Energy Resources Ltd (1878.HK)(SGQ.TO) fell about 12 percent in their Hong Kong debut on Friday, hurt by the stock's overly high valuation and poor timing.
SouthGobi, which raised $439 million in its IPO, is the second company to list in Hong Kong in 2010 after Russia's UC RUSAL (0486.HK)(RUSAL.PA). Both trade at double-digit percentages below their offering prices. [ID:nTOE60Q020]
Worries about monetary policy tightening in China have pressured stock markets in Asia, hurting initial public offerings both in Hong Kong and on the mainland.
On Thursday, shares of power transmission equipment maker China XD Electric (601179.SS) also fell below their IPO price in their Shanghai debut, the market's worst debut since 2006, underscoring poor investor sentiment. [ID:TOE60QAJ]
SouthGobi, also listed in Canada, fell as low as HK$105.6 in early trade in Hong Kong and by 0700 GMT were quoted at HK$108, compared with its IPO price of HK$126.04.
"Peers have fallen by about 15 percent since -- where it's trading now, we are quite happy. We expected it to open down because it's a soft market," SouthGobi President and CEO Alexander Molyneux told Reuters.
Hong Kong's benchmark Hang Seng Index .HSI has dropped 7 percent this year. Coal miners have been weak, with China Shenhua Energy (1088.HK) down 15.7 percent since SouthGobi started its IPO roadshow on Jan. 11.
Analysts also noted SouthGobi's valuation was much higher than its peers and the company had suffered losses in recent years, though they expect a turnaround from this year.
SouthGobi, owned by Canada-based Ivanhoe Mines (IVN.TO) (IVA.AX), is valued at 51.6 times and 21.3 times 2010 and 2011 estimated enterprise value to earnings before interest, tax, depreciation and amortization (EV/EBITDA), respectively, according to BMO Capital Markets.
By comparison, China's largest coal producer China Shenhua Energy trades at 9.8 times 2010 estimated EV/EBITDA and 8.7 times for 2011. Coking coal producer Hidili Industry (1393.HK) is trading at 14.4 times and 9.2 times 2010 and 2011, respectively, according to Citigroup research reports.
SouthGobi sold 27 million new shares, about 16.8 percent of its enlarged share capital, and secured Asia's top sovereign wealth funds, China Investment Corp [CIC.UL] and Temasek Holdings [TEM.UL] as cornerstone investors, each subscribing to $50 million worth of shares with a six-month lock-up period.
Citigroup (C.N) and Macquarie (MQG.AX) handled the deal.
Of the offered shares, 64.5 percent were allocated to institutional investors, 25.5 percent to Hong Kong retail investors and 10 percent to Canadian investors.
MONGOLIA EXPANSION
The company said it was focused on expanding its coal production capacity in Mongolia, centred around its Ovoot Tolgoi mine 40 km from the border with China.
Since the start of production at the mine in late 2008 until the end of September 2009, the company sold about 1.1 million tonnes of coal, SouthGobi said, adding it planned to eventually extract 8 million tonnes of metallurgical and thermal coal per year for Ovoot Tolgoi from 2012.
SouthGobi reported a $41.7 million net loss in January-September versus a year-earlier net loss of $52.6 million, due to substantial start-up mining costs.
It has forecast a 2009 net loss of no more than $111.2 million. (US$1=HK$7.75)gl
