The stomach turner, of course, was the sharp drop in the stock market. Shanghai’s benchmark stock index tumbled almost 9 percent on Feb. 27, setting off a wave of selling around the world.
And the possible eye opener? Two Chinese IPOs have just been added to the new-issues calendar. There’s one for this week and another one for next week. They have a few things in common.
Xinhua Finance Media Ltd.(NASDAQ: XFML proposed), a Shanghai-based provider of financial news and data in China, filed to price 23.1 million American Depositary Shares at $12 to $14 each to raise $300 million on Wednesday, Feb. 21. The deal jumped onto the IPO calendar to be priced on Thursday evening, March 8. In other words, the Xinhua offering made the leap from filing to pricing date in about two weeks.
That’s quick.
There were unconfirmed rumors that this deal was oversubscribed early last week. But the offering lost some steam with the stock market’s plunge. Nevertheless, the consensus is for a premium deal. And who knows? The stock market could always snap back.
{mosgoogle}Tongjitang Chinese Medicines Co.(NYSE: TCM proposed), a Shenzhen-based specialty pharmaceutical company focused on modernizing traditional Chinese medicines, filed to price 9.9 million American Depositary Shares at $15 to $17 each to raise $157.8 million on Monday, Feb. 26. The deal hopped onto the IPO calendar to be priced on Thursday evening, March 15 — or about two weeks after being filed.
That, too, was quick.
Even with the Tongjitang offering in the IPO pipeline for only a few days, there were already unconfirmed rumors that this deal is good.
Each company is reportedly in a dominant position within its respective industrial sector in China:
n Xinhua reports the financial news in China. It’s affiliated with the official Xinhua News Agency of the People’s Republic of China.
n Tongjitang believes it is the leading provider of traditional Chinese medicine to treat osteoporosis in China.
Each company is fast growing. Consider the follow comparison with 2006 and 2004:
— Xinhua reported total revenue for the year ended Dec. 31, 2006, of US$59 million, up from total revenues of US$401,000 for the year ended Dec. 31, 2004.
— Tongjitang reported total revenue for the year ended Dec. 31, 2006, of RMB485 million (US$62.1 million), up from total revenues of RMB234 million for the year ended Dec. 31, 2004.
Each company is profitable. Consider the follow comparison with two years ago:
— Xinhua reported net income for the year ended Dec. 31, 2006, of US$3.3 million, up from a net loss of US$1.2 million for the year ended Dec. 31, 2004.
— Tongjitang reported income for the year ended Dec. 31, 2006, of RMB134.3 million (US$17.2 million), up from net income of RMB11.4 million for the year ended Dec. 31, 2004.
A dominant position in its industry, fast growth and profitability have been the key ingredients that have resulted in huge aftermarket performances for IPOs coming out of China in the recent past. Look no further than Home Inns & Hotel Management (NASDAQ: HMIN), which closed on Friday, March 2, at $37.29 — UP 170.2 percent from its initial offering price of $13.80 per share, and New Oriental Education & Technology Group(NYSE: EDU), which closed on Friday, March 2 at $38.02 — UP 153.5 percent from its initial offering price of $15 per share.
There are other deals on this week’s IPO calendar. And each in its own way -– even the “blank check” companies — appears to be in demand.
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