June 7, 2004

China's Mengniu Sets IPO Price At HK$3.925
 

China Mengniu Dairy Company has set its initial public offering price at HK$3.925 - the top of the price range, sources said.

Mengniu, which offered 350 million shares for its first-time sale, could raise up to HK$1.37 billion based on the highest pricing, they said.

On Friday, the company had received orders from retail investors amounting to 200 times the shares on offer, which may prompt it to increase the retail tranche by five times.

The retail portion, which comprises 10 per cent of the 350-million-share global offering, attracted about HK$25 billion in orders, market sources said.

Mengniu, the largest milk products supplier in China with a market share of about 20 per cent, has raised its price range by 16 per cent to between HK$3.125 and HK$3.925 per share, or 15-19 times its forecast earnings this year. It has said it will pay out 25 per cent of this year's profit in dividends.

Despite investors' waning appetite for IPOs recently, market observers widely expect the Mengniu offer to be well-received by investors due to the promising dairy market in China.

While global dairy sales declined at a compound annual growth rate of 0.04 per cent between 1998 and 2002, China has reported a 15.5 per cent rise over the same period.

Between 1998 and 2002 global liquid milk sales remained around US$100 billion (HK$780 billion), falling slightly over the period by a compound annual growth rate of 0.25 per cent. However, China's liquid milk sales grew at a compound annual growth rate of 26 per cent.

According to an ACNielsen survey made in 24 of China's 31 provinces, Mengniu has a 20.6 per cent share of the liquid milk market by sales value, excluding yoghurt and milk beverages.

Established in 1999, Mengniu has built strong brand name recognition. In February 2002, the Mengniu trademark was awarded certification as a "PRC Famous Trademark".