China Glass eyes US$25m share sale

Date: 25 May 2005

China Glass Holdings, which makes glass products for cars and buildings, plans to raise US$20-25 million (HK$156-195 million) next month by listing its shares on Hong Kong's main board, market sources said.

The Jiangsu-based private enterprise is about 33 percent indirectly owned by Legend Holdings Company, a sister company of China's largest computer maker, Lenovo Group.

The company produces a wide range of flat glasses used in construction projects, including window glass, interior furniture glass and decorative glass for buildings. Production for automobile grade glass and construction glass accounts for 46.8 percent and 53.2 percent, respectively.

China Glass is said to have a utilization rate of 90 percent and aims to raise its daily melting production capacity by 67 percent - from 900 tons to 1,500 tons.

The capacity will be boosted by adding a third production line of float glass - a type of flat glass - in the fourth quarter. The new line is under construction and will use high quality float technology.

To sharpen its competitive edge, the flat glass maker plans to begin processed glass production and modify one production line into making ultra-thin flat glass for the automobile and electronics sectors next year.

China Glass' net profit rose almost tenfold to 38 million yuan (HK$35.8 million) in 2003, from four million yuan a year earlier, before posting a 71 percent rise to 65 million yuan last year. Turnover grew 62 percent to 351 million yuan in 2003, and rose 22.5 percent to 430 million yuan last year.

Bankers close to the IPO said a fair price for China Glass shares will be about 12-15 times its 2004 earnings. Hong Kong-listed glass maker Zhejiang Glass' price-to-earnings multiple was 6.3 times in 2004 while Luoyang Glass' was 17 times.

The increased revenue was driven by a continued rise in exports and increased average selling prices.

The company exported 21.3 percent of its total sales volume last year, from 14.8 percent a year earlier. South Korea and Egypt - the firm's biggest export regions - made up 61 percent and 12 percent, respectively, of export sales.

Average prices of its products were 54.9 yuan, 60.5 yuan and 69.9 yuan per case, respectively, in 2002, 2003 and 2004. Still, it is lower than the industry's average of 76 yuan, sources said.