The IPO Buzz: From Shanghai to Wall Street

Bankers have priced 16 Chinese IPOs in the U.S. capital markets so far this year, according to Securities and Exchange Commission filings. And they have another one on tap for this week. That will make 17 for the year and counting.
This year’s Chinese IPO traffic has already surpassed the previous annual records of 12 IPOs priced in the United States in 2000 and another dozen in 2004. But that’s half the story.
Names like Acorn International (NYSE: ATV) (up 33.4 percent from its initial offering price), E-House (NYSE: EJ) (up 65.9 percent) and Perfect World (Nasdaq: PWRD) (up 69.3 percent) sound like something from a Gilbert & Sullivan operetta. But they produced serious money in the world of international finance. Consider the following:
Twelve of this year’s 16 Chinese IPOs closed above their initial offering prices on Friday, Sept. 28. The average gain for all 16 was 62.3 percent. That’s almost five times better than the 13 percent average gain for all other IPOs priced so far this year. And there’s more.
Three of this year’s top five U.S. IPO performers are from China: JA Solar Holdings (Nasdaq: JASO) (up 199.7 percent), LDK Solar (NYSE: LDK) (up 155.2 percent) and Yingli Green Energy Holding (NYSE: YGE) (up 137 percent).
These three IPO stars from China are all in a hot industrial sector: energy. Each is forecast to produce annual revenue growth of well over 25 percent through the end of 2009, according to the consensus of analysts’ estimates compiled by First Call. What’s more, their earnings are projected to triple by the end of 2009, the First Call analysts’ consensus showed.
Tuning in to China Digital TV
Let’s take a look at this week’s IPO calendar, which consists of six deals expected to raise $822 million. But there’s just one that has raised Wall Street’s heart rate. The one on the “most wanted” list is another Chinese IPO.
China Digital TV Holding Co., Ltd. (NYSE: STV proposed), is a Beijing-based provider of conditional access, or CA, systems to China’s digital television market.
Here’s the scoop: The People’s Republic of China television network operators are in the early stages of switching from analog to digital transmission, according to China Digital’s prospectus. And the government has set a target for nationwide operators to complete the transition to digital transmission by 2015.
China Digital believes it will be the primary beneficiary of this transition because CA systems are an essential component of any pay-television platform. It supplies this product.
As an example, China Digital reported it has installed CA systems at 130 digital television network operators in 26 of China’s 32 provinces as of June 30, 2007. And the company believes it had about 44 percent of that market in the first and second quarters of this year.
It appears that China Digital has been able to translate this performance into positive numbers.
For the 12 months ended June 30, 2007, China Digital produced revenues of $41.6 million, up from revenues of $3.6 million for the year ended Dec. 31, 2004
For the 12 months ended June 30, 2007, China Digital had net income of $16 million, compared with a loss of $10.7 million for the year ended Dec. 31, 2004.
China Digital TV expects to price 12 million American Depositary Shares at $11 to $13 each on Thursday evening, Oct. 4, to start trading on Friday morning, Oct. 5, 2007.
If this IPO performs as well as the Wall Street professionals think it will, then China Digital TV will give investors a chance to tap into that huge country’s growing appetite for entertainment.