Two mainland companies unveiled plans to go public in Hong Kong, targeting a total of HK$2 billion after earlier delaying their announcements due to poor market conditions.
SPT Energy, a Beijing-based drilling and well-services provider, aims to raise up to HK$546 million by selling 335 million shares at HK$1.23 to HK$1.63 each. It is pitching its shares at 7.6 to 10 times this year's forecast earnings. Rival Anton Oilfield Services last traded at 10.2 times this year's estimated earnings.
Meanwhile, China Tianrui Group Cement aims to raise up to HK$1.45 billion by selling 400.9 million shares at HK$2.41 to HK$3.61 each. It is pitching its shares at 3.8 to 5.6 times this year's projected profit. In this year's first-half, SPT sourced 31.5 per cent of its sales from drilling services, 18.3 per cent from well preparation and 50.2 per cent from output-enhancement services.
Kazakhstan contributed 53.4 per cent of the firm's sales in the six-month period, with 30 per cent from the mainland. China National Petroleum Corp (CNPC), parent of listed PetroChina - the nation's largest oil and gas producer - accounted for 65 per cent to 72 per cent of its sales in the past three years.
While having a state-backed giant such as CNPC as its mainstay customer has helped business growth in the past few years, it also brought operating risks, partly due to SPT's weak bargaining power against CNPC.
After PetroChina disclosed that it found huge new reserves in its Jidong oilfield in 2007 - billed by the oil giant as one of the largest domestic oil discoveries in decades - it planned a huge investment budget and urged SPT to prepare for the project. SPT took the risk of buying 69.4 million yuan (HK$84.8 million) of inventory without having a binding order from PetroChina.
