China International Travel Service Corp said on Tuesday it would launch a Shanghai stock initial public offering this week that is worth about 1.7 billion yuan to fund expansion, including setting up new tourist agencies.

China International Travel Service Corp

China Travel, the country's top tourist agency, would start book-building on Wednesday to issue as many as 220 million A shares denominated in yuan , or up to 25 percent of its expanded capital after the IPO, it said in a prospectus published in the official Shanghai Securities News.

China's stock regulator has pushed a slew of firms to launch IPOs since it resumed approvals in June after a 10-month ban. That comes amid a backdrop of a volatile share market, with the benchmark Shanghai Composite Index <.SSEC> having rebounded 13 percent this month after a 22-percent slump in August, its second biggest monthly fall in 15 years.

The index slumped in August after a 90-percent jump from the start of this year but has since been lifted by government market-friendly steps, mainly repeated official pledges to support the market.

But the push by the China Securities Regulatory Commission of more IPOs into the market despite the index's volatility betrays the limit of the government's support to the market, analysts said. Worries persist about an asset price bubble at a time when the world's third largest economy has just started recovering.

Beijing-based China Travel said it needed the A-share issue proceeds for expansion of core businesses, including establishing new tourist agencies both at home and abroad, upgrading service facilities and opening more duty-free shops.

It posted a net attributable profit of 221 million yuan for 2008, up slightly from 217 million yuan in 2007, on earnings per share of 0.34 yuan last year compared with 0.31 yuan in 2007, according to its share issue prospectus.

If the company wants to raise 1.7 billion yuan on an issue of 220 million shares, it will have to issue the shares at 7.73 yuan each, according to Reuters calculations.

At its maximum issue, the IPO will dilute its EPS to 0.255 for 2008, meaning a 7.73 yuan per share issue would put its IPO price at slightly above 30 times its 2008 earnings on a fully diluted basis -- a relatively high price/earnings ratio for domestic IPOs, according to Reuters calculations.

China Securities, a Beijing-based brokerage, was appointed the lead underwriter, China Travel said in the prospectus.

China Travel would start consulting investors about pricing the offer on Wednesday and will take institutional subscriptions on Sept. 22 and retail subscriptions on Sept. 23. Up to 20 percent of the shares on offer will be earmarked for institutions and the rest for retail investors.

The company said it hoped to list on the Shanghai Stock Exchange as soon as possible after the IPO, but the prospectus did not give a firm date.

Editor: Lency