Taiwan-based Asia Cement has received the green light from Hong Kong Exchanges and Clearing to spin off its mainland cement operations in a listing worth as much as HK$1 billion, according to market sources (aqs reported in the South china Morning Times). The timetable and pricing of the listing have not been determined but fund managers and market observers expect it to kick off in September. "The company is now just waiting for more favourable market conditions. It is definitely not a good time for this initial public offering now," one investment banker said. Another investment banker said the company needed to "build up a better story and more attractive themes amid the recent decline in cement prices and investors’ concerns over contracting margins for cement mills". DBS Asia Capital (Taiwan) is expected to be appointed sponsor for the listing.
Cement prices have fallen significantly in eastern China as a result of the clampdown on investment and credit on the mainland.
The China Building Materials Institute said the average price at large cement mills had fallen from 280 yuan per tonne in the first quarter last year to about 230 yuan last month and 215 yuan early this month.
On the costs front, Asia Cement’s mainland operation - largely based around Jiangxi, Wuhan and Shanghai - seems vulnerable to rising energy costs, which account for 50 per cent to 60 per cent of a mill’s total costs.
Late last year another Taiwan cement maker, Chia Hsin Cement, floated its mainland business in Hong Kong. Its shares closed at HK$1.41 yesterday, 4.72 per cent below the IPO price of $1.48.