Linerboard maker China Sunshine Paper closed higher than its offer price in its trading debut yesterday, despite a falling stock market.

 

Sunshine's shares closed at HK$6.17, up 2.8 percent from the offer price of HK$6 after peaking at HK$6.5. The company priced its 100 million new shares close to the lower end of the indicative range at HK$5.75 to HK$7.45 each, raising HK$600 million.

 

"The share performance should be better in the long term as it will reflect its future potential," said Wang Dongxing, chairman of the Shandong-based firm. "The company has competitive strength in its production facilities."

 

Wang said Sunshine had already taken measures to deal with rising production costs, including strengthening management of its upstream business, setting up 10 recovered paper collection points across the country and developing new materials for production.

 

The company also plans to pass on production costs to consumers.

 

Kenny Tang, associate director of Tung Tai Securities, said the stock did well on its first day because it was priced comparatively cheaply.

 

The company's P/E ratio is about 18 times, while that of leading industry players like Nine Dragons and Lee & Man is more than 25 times. But, Tang said a P/E of above 20 times would be too expensive for Sunshine.

 

"Sunshine is much smaller in scale," said Kallman Wong, an analyst at Taifook Securities. "But the company is expected to benefit from the rapid growth of the consumer market as its clients are related to a number of well-known retailers."

 

With production bases in Shandong and Jiangsu provinces, Sunshine's annual estimated production capacity was 360,000 tons as of June. It has signed deals with several packaging and printing firms that supply to clients like Mengniu Dairy, Tsingtao Brewery, Yili Dairy, Haier, Huiyuan Juice and Master Kong.

 

Interest rate-sensitive property and banking stocks came under pressure after a jump on Tuesday, leading a plunge on the Hang Seng Index.

 

(China Daily December 13, 2007)