154 million buck ipo for chinese fertilizer co

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    China XLX Fertiliser to raise S$154m in IPO
    By Jeana Wong, Channel NewsAsia | Posted: 11 June 2007 2236 hrs



    SINGAPORE : A new China play is about to list on the Singapore Exchange.

    China XLX Fertiliser is aiming to raise S$154 million from its IPO.

    It is offering 200 million new shares at 77 cents each.

    The company is the sixth largest coal-based urea fertiliser producer in China by capacity.

    China XLX Fertiliser is the latest China entrant to the Singapore market.

    Its IPO will trade at around 24 times price-to-earnings (PE), but according to its underwriters, the price takes into account the company's growth potential.

    The coal-based fertiliser maker produced an annualised 315,000 tonnes of urea fertiliser last year and could more than double that production.

    In just four months, the firm has already produced some three quarters of last year's output.

    "The company has already produced 240,000 tonnes in four months. It has covered a substantial part of last year's production and fund managers have looked at these figures very closely. The growth is apparent, which makes the historical PE less relevant in terms of how one would value this company," said Esmond Choo, executive director of UOB Kay Hian.

    UOB Kay Hian said XLX's regional and global counterparts are trading at about 18 times forward PE ratio.

    XLX made a net profit of S$26 million in the last fiscal year, on revenues of $180 million.

    The company plans to use about a third of the proceeds to buy production plants so as to expand its capacity, as well as to build a new power generator to lower its operating costs.

    It aims to use the rest for mergers and acquisitions with profitable enterprises within the industry.

    XLX said electricity costs make up 20% of the company's total expenses, while coal - a key raw material - makes up half.

    Although coal prices have been on an uptrend, XLX said its coal costs have risen by only about 5% over the last three years.

    As for its core business, making fertiliser based on coal, XLX does not expect rising coal prices to work against its favour.

    "The rise in coal prices will force our company to improve our efficiency and reduce costs. At the same time, higher coal prices will raise the operating expenses within the industry. If prices of urea fertiliser stay stable, the less cost-efficient manufacturers will be gone. That will give us even more market share," said Liu Xing Xu, chairman & CEO of China XLX Fertiliser.

    The offer closes on June 18 and the shares are expected to trade two days later. - CNA /ls

    http://www.channelnewsasia.com/stories/singaporebusinessnews/view/281606/1/.html
 
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