China Ouhua attracts institutional investors

KUALA LUMPUR: China Ouhua Winery Holdings Ltd has successfully placed out the 124.55 million new shares allocated for private placement under its initial public offering (IPO) to institutional investors and high net worth individuals that include Singapore-based insurance group Great Eastern.

Its IPO adviser, sole underwriter and placement agent OSK Investment Bank Bhd corporate finance director Tan Meng Kim said China Ouhua had received very good response from local and foreign institutional funds and high net worth individuals.

“The private placement portion has been fully placed out, which shows the strong interest among institutional investors,” he said when contacted.

Wang Chao ... "Wine consumption has grown at an impressive rate of about 30% annually."

Sources said Great Eastern had taken up more than 20% of the private placement shares and the other investors were from Hong Kong, Singapore and Malaysia.

Shandong-based China Ouhua is slated to make its listing debut on Nov 3, making it the fifth China-based company floated on Bursa Malaysia’s Main Market .

There is a growing concern that institutional investors seem reluctant to take up shares in Chinese companies and are sceptical of their earnings following accounting irregularities involving several China-based companies listed in Singapore.

However, China Ouhua executive chairman and chief executive officer Wang Chao said the company had no problem securing institutional investors and had rejected some of the interested parties.

The four Chinese companies now listed on Bursa are Xingquan International Sports Holdings Ltd, Multi Sports Holdings Ltd, XiDeLang Holdings Ltd and K-Star Sports Ltd. Unlike these shoe makers, China Ouhua is involved in the production and distribution of red and white wine.

China Ouhua’s public issue involves 132.55 million new shares, representing about 19.8% of the company’s enlarged issued and paid-up share capital, at an issue price of 60 sen. Of the total, 8 million shares are available for the Malaysian public.

The IPO price of 60 sen per share translates into a proforma price-earnings multiple of about 6.7 times. Its market capitalisation upon listing will be RM400mil.

For the financial year ended Dec 31, China Ouhua registered total revenue of 376mil renminbi (about RM175mil) and profit after tax (PAT) of 133mil renminbi (about RM62mil) or a PAT margin of 35%.

The company plans to distribute dividend of at least 35% of its net profit for the financial year ending Dec 31.

Wang said the company aimed to raise from its IPO up to RM80mil proceeds, which would be used to expand its market presence and distribution network, enhance the quality of and control over the company’s materials and suppliers, as well as expand its production capacity and range of wines.

Speaking after the company’s prospectus launch yesterday, Wang said China Ouhua was very optimistic of China’s wine market going forward and its performance would benefit the company directly.

“Wine consumption has grown at an impressive rate of about 30% annually. When we started our business in 1997, the annual wine consumption in China was of a mere 50,000 tonnes but it grew to 1 milion tonnes last year, but there is much room for future growth,” he said.

He said the company produced and distributed 147 varieties of red and white wines under its flagship Fazenda Ohua Wine and its International Wine labels.

The company currently has 113 specialty stores in China and plans to increase that to 200 by end-2011 to enhance its distribution network and market reach.