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Huiyuan HK IPO sees strong demand

By Lillian Liu (China Daily)
Updated: 2007-02-09 08:53

China Huiyuan Juice Group, one of the largest juice concentrate producers in the country, kicked off its HK$2.8 billion five-day initial public offering yesterday, with strong demand from investors clamoring for a piece of China's booming consumer sector.

The fruit and vegetable juice producer is offering 400 million shares, allocating 360 million to international investors and the remainder to individual investors.

The trading debut is scheduled for February 23.

The proposed share price is between HK$4.8 and HK$6 apiece 25 to 30 times 2007 earnings.

A customer picks up a carton of Huiyuan juice from a supermarket shelf in Nanjing, the capital of East China's Jiangsu Province. Huiyuan kicked off its HK$2.8 billion IPO yesterday. Liu Jianmin

Huiyuan's valuation is much higher than other Chinese juice makers Andre Juice and Haisheng Juice trade at about 13 times and eight times 2007 earnings, respectively.

But investors expect the company, the first to move into China's branded juice market, to generate higher profit growth.

Analysts said the company, as a market leader, deserved a higher valuation. They also predicted the final price was likely to be fixed, like many other mainland share issues, at the top of the indicative range, thanks to a burgeoning well-off middle class seeking high quality diets.

Market research conducted by AC Nielsen showed that Huiyuan ranked No 1 in the pure juice sector in China, while it ranked No4 in juice drinks after Uni-President, Coca-Cola and Tingyi, known as Master Kong in the country.

French dairy firm Danone agreed last June to buy 159 million shares in Huiyuan at the issue price to maintain its 22 percent stake.

Besides Danone, private equity firm Warburg Pincus and other financial investors that bought $85 million worth of Huiyuan's convertible bonds will hold 7.25 percent and 2.21 percent respectively after the share sale.

UBS, the underwriter of the offer, said in a research report that Huiyuan's production capacity is likely to grow 7 percent next year to 1.5 million tons annually after adding at least one factory in the eastern region this year.

Capital expenditure will be boosted 182 percent to 758 million yuan this year compared with 288 million yuan last year.