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Your-Mart float sees investor flood

By Bi Xiaoning (China Daily)
Updated: 2009-07-09 08:00

The Your-Mart logo at a company event in Beijing. With an issue price at 19.58 yuan per share, the retailer could raise about 979 million yuan through its initial public offering. [Agencies]

Your-Mart Co, the largest retailer in Hunan province and the third company to obtain approval for an initial public offer after the ban on new share issues was lifted late last month, has shot ahead of two forerunners in investor popularity, especially among institutional investors.

The company said its IPO was 244.2 times over-subscribed in off-line bidding by institutions, compared with over-subscription of 164 times for Guilin Sanjin Pharmaceutical, the first to come to the market for funds after the IPO resumption, and 189 times for Zhejiang Wanma Cable.

Your-Mart's online subscriptions began yesterday.

Judging by the building up of market enthusiasm for IPOs, stock market analysts said the chance for applicants to win allotments of Your-Mart's new shares would be very slim.

Galaxy Securities estimated that the ratio of allocation to subscription would be even lower than the 0.17 percent for Guilin Sanjin and 0.13 percent for Zhejiang Wanma.

"It isn't a surprise that the IPO of Your-Mart has generated more interest among the investment public than the previous two," said Li Daxiao, director of research at Yingda Securities. "The IPO craze is building up fast," he said.

The company's issue price was fixed at 19.58 yuan ($2.87), at a P/E (price to earnings) ratio of 31.58 times.

Its P/E ratio was a little higher than some listed companies in the sector, but its main underwriter United Securities said the industry's average P/E was about 37 times, which was an important reference point for the new issue price.

The company's issue price was also said to be moderate during the price inquiry process.

Related readings:  IPO activity to pick up in second half of the year  IPOs back after long suspension  Investors flock to buy Guilin Sanjin shares  Zhejiang Wanma to start road show, 2nd IPO this year

Considering the valuation of the industry's listed companies, the development of the retail industry in Hunan province, the company's leading status in its area of operations and its growth rate over the past three years, Guotai Junan Securities had suggested a price band of 18.75 yuan to 22.5 yuan a share during Your-Mart's pre-IPO road show.

Many other brokerage firms too quoted an issue price at over 20 yuan. Orient Securities had even suggested it could be in the 20 yuan to 25-yuan range.

"The issue price can be said to be reasonable, leaving room for further increases after its market debut. Your-Mart plans to go public around the third week of July," said the company's board secretary Chen Xuewen.

At 19.58 yuan apiece, the company could raise about 979 million yuan after issuing 50 million A shares. In the share issue prospectus, Your-Mart said it would raise 500 million yuan to upgrade its main stores in its headquarters in the provincial capital of Changsha.

"After upgrades, our department stores area in Changsha can be doubled. Sales revenue is likely to double as well. We aim to touch a sales revenue of 3 billion yuan in two to three years and seek opportunities to expand the business outside the province," the company's Chairman Hu Zijing said on Tuesday.

Hu also said it would invest about 200 million yuan to develop the new outlets.

Founded in 2004, Your-Mart is the leading department store in Hunan. Its sales revenue in 2008 was about 38.2 percent of the total turnover of all large-scale department stores in Changsha.