HK listing rings in media changes

The Chinese mainland's first media company to list on an international stock exchange was met with an overwhelming response yesterday, reported China Daily on Wednesday.

The IPO of the Beijing Media Corp Ltd was covered 422 times after its flotation on the Hong Kong stock exchange, rising to 50 per cent from its original 10 per cent issue.

The first overseas flotation of a mainland paper on an international stock market has been hailed as a significant step to modernize China's media industry.

And it opens the doors to international investors seeking to gain a foothold in the country's huge advertising and media sectors.

The stocks made their expected opening 10-15 per cent gain, and analyst predict a 30 per cent surge in the medium term.

International placing was about 16 times covered, and according to Hong Kong-based financial specialists, Beijing Media "can be a major investment proxy to China's vast advertising and media market."

The advertising and sales arm of the group's flagship Beijing Youth Daily, China's second largest newspaper in terms of advertising revenue, is the first State-owned media firm to join China's H-share companies listed in Hong Kong.

The South Africa-listed media firm Naspers, which owns 35.84 per cent of Tencent, China's instant message service operator, has agreed to buy a 9.9 per cent stake in the company, or 39.6 per cent of the offering, with a six-month lock-up period.

"Beijing Media's listing is a milestone for the progress in which Chinese media are building themselves into a modern industry, and will serve as a leading example for other Chinese media organizations," said Cao Yuanzheng, deputy executive president and chief economist of the BOC International, an investment banking operating under Bank of China.

Beijing Media's offer includes 47.74 million shares, or 25 per cent of its enlarged equity.

It has raised HK$904.67 million (US$116 million) after pricing its IPO at HK$18.95, the top end of its HK$14.95-HK$18.95 offer price range.

The newspaper Beijing Youth Daily, which is not included in the overseas listed company, has a circulation of 600,000.

The paper's advertising revenue reached 900 million yuan (US$108 million) in 2003, making it the country's second biggest.

Assuming the net proceeds from the listing at about HK$667 million (US$85.5 million), Beijing Media plans to use HK$100 million for developing its weekend newspaper, about HK$80 million for developing a number of weekly magazines, HK$250 million for investing in the TV industry in Beijing, and about HK$200 million for acquiring other media businesses, and the remaining as general working capital.

Ben Kwong, Hong Kong-based associate director of KGI Asia, told China Daily: "Considering the market's continued strong liquidity, Beijing Media is a trading buy which can be managed easily and reap profits quickly."

He added that Beijing's host of the 2008 Olympic Games might boost overall ad spend in the capital city, and underpin the company's long term business prospect. He said he expected the stock would made a solid debut today, when IPO trading started.

According to Marco Mak, head of research at Taifook Securities, a second-tier broker that has received HK$800 million subscription from retail investors in Hong Kong, Beijing Media "is a good buy" as the stock has its fresh and unique selling point as the first mainland-based newspaper group to list overseas.

Through buying the stock, foreign investors can indirectly benefit from the rapidly growing media and advertising market in the Chinese mainland, he said, adding shares of Beijing Media would surged up to 30 per cent in the near term.

Kenny Tang, associate director of Tung Tai Securities, put Beijing Media on his IPO recommendation list.

"The company is the media agent of one of the largest presses in Beijing and has 30-year exclusive rights. Full-year net profit is expected to rise 27 per cent year-on-year to 183 million yuan (US$22 million), representing a prospective price/earning (P/E) ratio at about 19 times, a reasonable level for investment," Tang said in a research note to clients, who set a target price of HK$24 for the stock.

Sun Wei, Beijing Media's president and executive director, said in Hong Kong that the company is aimed at becoming one of the country's leading multi-media companies.

But there are some investment analysts who claim Beijing Media's development plan is muddled, saying it would be risky for the company to invest in the production of television programmes if it did not have control of a distribution channel.

Alleged inadequacies in the company statement of its development plan has even led Sun Hung Kai Securities to advise clients not to buy the stock.

Meanwhile, sources with China's biggest media group, Guangzhou Daily Group in South China, told China Daily yesterday it is working hard to make itself one of the star IPOs in the domestic capital market in 2005, despite a long delay due to "operational difficulties."

The Guangzhou Daily's circulation was 1.63 million and its advertising revenue more than 2 billion yuan (US$240 million) last year.

The company reportedly had a plan for its non-editorial assets through what Chinese investors nicknamed "back-door listing" on the domestic Shenzhen Stock Exchange, after its subsidiary, Guangzhou Dayang Culture and Communication Co Ltd signed a stock swapping deal with Qingyuan Jianbei Group early in 2000.

Qingyuan Jianbei Group's shares are only traded on the Shenzhen Stock Exchange without being officially listed on it. It is a company engaged in the advertising, printing and publication retailing business.

After a long delay, during which a few Guangzhou Daily's top executives were arrested under corruption charges, Qingyuan Jianbei announced earlier this year that it had obtained IPO approval from the General Administration of Press and Publication.Enditem

Source: China Daily