Midea, the country's largest air-conditioner maker, has got approval from the China Securities Regulatory Commission (CSRC) to relaunch its capital raising scheme that has been put on hold since early 2008.

At that time, the company said the new share issue was to be the largest ever such exercise in the domestic home appliance industry.

The Guangdong-based consumer electronics manufacturer said it has got clearance to float 189 million new shares worth about 3.27 billion yuan at the closing price 17.30 yuan per share yesterday, down from 17.95 yuan last Friday.

The new shares issue would be the first time Midea is raising capital from the secondary market since 1999. The company said the proceeds of the issue would be invested in projects such as the research and development of air conditioning compressors, central air conditioning equipment, and to invest in establishing a new production base in Vietnam.

The approval will be valid for six months starting last Friday, the company said in a statement to Shenzhen Stock Exchange yesterday.

"The new capital will enable the company to diversify its product range and strengthen its research and development capability," said Wang Nianchun, analyst, Guosen Securities.

Like many other electrical appliance makers, Midea stands to benefit from the government-backed subsidy scheme for some white goods purchases by rural consumers.

According to figures from the Ministry of Commerce, the total revenue generated from air-conditioner sales in rural areas in the first half of this year was about 618 million yuan. Midea had a 33.53-percent market share in this segment.

Stock analysts have upgraded or maintained their ratings on Midea to "recommend" or "buy" after the fund raising announcement. "The new shares will help lift the company's profitability, and speed up its asset restructuring and also increase the net assets by 35 percent," said Wang.

Guojin Securities said that the fund raising would help the company alleviate its capital structure and decrease its financial costs.

Despite the long-term positive anticipation, Midea's A shares dropped 3.62 percent yesterday to close at 17.3 yuan on concerns of earnings dilution.

(China Daily July 28, 2009)