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Everbright Securities gets IPO green light

By Bi Xiaoning (China Daily)
Updated: 2009-07-28 08:13

Everbright Securities Co, China's 11th largest brokerage by assets, has got final approval for an initial public offering (IPO) in Shanghai, the first brokerage to raise capital since CITIC Securities in 2002.

The company plans to sell around 520 million shares, or 15.21 percent of its enlarged outstanding capital, on August 4, according to a filing to the Shanghai Stock Exchange.

The brokerage said it would start the price query process from today. Industry experts estimated the company's new shares to be priced between 15 to 20 yuan. At this price range, the amount of capital raised would be around 10.4 billion yuan.

According to the prospectus, Everbright Securities also plans to increase the number of outlets to more than 120 either by opening new ones or acquiring sales offices from competitors. The proceeds of the proposed IPO will also be used to replenish working capital, the company said.

"The regulators seem to be encouraging well-established and competitive stock brokerages to raise capital from the secondary market to help them strengthen their financial structure and accelerate industry-wide integration," said Lu Junlong, analyst, China Finance Online.

Everbright Securities plans to sell over 500 million shares or 15.21 percent of its enlarged outstanding capital on August 4. [CFP]

China Merchants Securities Co is expected to be the next stock brokerage that could go public.

The brokerage went through hearings at the listing panel of the China Securities Regulatory Commission, the penultimate step in the process of getting IPO approvals, in September 2008. But its IPO plan was shelved due to the stock market crash.

The market, of course, has recovered since then and the company has revived its capital-raising plan.

According to its pre-release prospectus, China Merchants Securities plans to issue 359 million new A shares to raise 8 billion yuan.

Many other stock brokerages are also gearing up for IPOs.

They include Guotai Jun'an Securities, Huatai Securities, Guangfa Securities, Qilu Securities and Bohai Securities.

The benchmark Shanghai Composite Index has gained 85 percent so far this year, after plunging 65 percent in 2008. Buoyed by the rally in the stock market, many stock brokerages posted stellar mid-term numbers.

As of July 20, 47 non-listed stock brokerages had all posted profits in the first half, according to Chinese financial data provider Wind Info. Guotai Jun'an Securities topped the list with 2.32 billion yuan net profit, followed by Guangfa Securities and Shenyin & Wanguo Securities.

Everbright Securities posted a net profit of 1.28 billion yuan in the first half, up 37.96 percent year-on-year, while China Merchants Securities said its net profit rose 37.83 percent year-on-year to 1.472 billion yuan. China Securities Co and Qilu Securities also saw their net profits surge to over 1 billion yuan.

Related readings:  Everbright, Merchants Securities fare well   Everbright to raise funds   Everbright Securities may trigger wave of new IPOs   Everbright Bank posts 7.32b yuan net profit in 2008

Looking ahead, industry experts said they were optimistic about the brokerage firms' performance in the second half.

"The main businesses of the brokerages are set to see big growth in the second half," said Li Daxiao, director of research at Yingda Securities.

According to Li, the brokerage business, self-support business and asset management business could boom with the recovery of the stock market. With the resumption of the IPO market and the launch of the NASDAQ-like growth enterprise board (GEB), the investment banking business could also be well developed.

Last Sunday, the first application reception date for GEB, 38 brokerage firms submitted 108 companies' application materials to the CSRC. China Merchants Securities alone recommended 12 companies for the first-batch listed companies.

"We also have others in the pipeline," said Wang Lixiang, executive board director with China Merchants Securities.

Industry analysts said the brokerages could also benefit by developing innovative businesses like direct investment, index futures, margin trading and securities selling.