SHANGHAI- China's military uniform maker Jihua Group, said on Friday it would launch an initial public offering worth about 3.25 billion yuan next week mainly to fund production expansion.
Jihua Group, which has a 75 percent share of China's market for military and police garment, among other equipment, planned to issue 1.157 billion A shares denominated in yuan for a later listing on the Shanghai Stock Exchange.
The issue would account for 30 percent of the company's expanded share capital, it said in a prospectus published in the Shanghai Securities News.
Its announcement comes as China's stock market begins to show signs of a recovery, with the benchmark Shanghai Composite Index jumping nearly 6 percent this week after having fallen as much as about 30 percent earlier this year.
The market is recently supported by improving liquidity on China's money market and expectations of an easing off of government curbs on the property market -- two major factors that have made the Shanghai Composite Index one of the world's worst performers so far this year.
The market has also been hit by too many new share offerings, including a slew of fundraisings by banks, so Jihua's announcement may also have some negative impact.
Among other IPOs in pipeline, the China Securities Regulatory Commission said on Thursday that it would review China Everbright Bank's application for a Shanghai IPO next Monday, potentially enabling the bank to raise about 20 billion yuan.
Beijing-based Jihua said it needed about 3.25 billion yuan to help it fund five projects to expand production of military garment, boots, cloth and special protection equipment as well as to improve its research ability.
Actual proceeds could exceed the target, and extra money would be used to supplement the company's working capital, it said.
Jihua made an attributable net profit of 453 million yuan last year, down slightly from 466 million yuan in 2008, with unchanged earnings per share of 0.17 yuan.
Its IPO will dilute its 2009 EPS to 0.13 yuan. If it raises 3.25 billion yuan on a 1.157 billion-share issue, its projected IPO price of 2.8 yuan will represent a historical price earnings ratio of 21.5 times, according to Reuters calculations.
Such valuations are reasonable by Chinese standards, especially taking into consideration the company's leading status in China's military supply industry.
Jihua said it had appointed Swiss bank UBS as its IPO's lead underwriter.
