Life of Guangzhou - Chaozhou:Ouhua Plans Listing in Singapore

Ouhua Energy Holdings Ltd, China's third-largest liquefied petroleum gas (LPG) distributor, plans to list on the Singapore Exchange.

The company plans to sell new and vendor shares according to its prospectus for the issue.

A source close to the deal yesterday said the company is looking to sell at least 25 per cent of its enlarged capital, raising as much as 40 million Singapore dollars (US$25 million).

"For a mainboard listing you need to sell a minimum 25 per cent. Demand is strong so they may increase the offering to around 30 per cent," the source said, adding that the firm would begin roadshows ahead of the sale within two weeks.

Ouhua Energy, based in Chaozhou, Guangdong Province, said proceeds from the share sale would be used to expand its sales network and improve production facilities.

"Ouhua Energy embarked on a production capacity expansion programme in 2006, to raise annual designed capacity from 600,000 tonnes to 900,000 tonnes," the company said in a statement.

Ouhua Energy earned a net profit of 79.2 million yuan (US$9.9 million) in 2005, according to the prospectus.

In the first five months of 2006, net profit grew 27.7 per cent to 34.7 million yuan (US$4.3 million).

Based on a probable price to earnings ratio of 8 to 10, the firm could have an indicative market cap of about US0 million before the pre-IPO capital increase.

Stirling Coleman Capital Ltd is the sale's lead manager and UOB Kay Hian Pte Ltd is the underwriter.

Singapore's stock market tends to attract small and medium-sized Chinese companies, whereas Hong Kong attracts the bigger IPOs, often of State-owned companies.

About 70 out of 107 Chinese firms listed in Singapore have a market capitalisation of less than US$100 million, according to Reuters data.

Over the past 10 years, global consumption of LPG has grown annually by about 3.1 per cent, with the fastest-growing region being Asia, industry sources said.

China, the world's third-largest LPG consumer after the United States and Japan, produced 16.1 million tons in the year 2005, a year-on-year increase of 7.62 per cent.

Currently Sinopec supplies 32 per cent of domestic LPG consumption, with 31 per cent coming from PetroChina and local firms, and the remaining 37 per cent imported.

According to industry forecasts, domestic demand for LPG is expected to reach 28 million tons by 2010.

Founded in 2005, Ouhua Energy is principally engaged in the import, production, storage, and sale of LPG in southern and eastern parts of the country.

Its business range covers an area including Guangdong, Fujian, Hainan, Jiangxi, Zhejiang.