Auto dealer testing the waters on HK initial public offering
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Valuation
The investment banking unit of Bank of China Ltd estimated Zhongsheng to be worth 30.8 billion yuan to 38.2 billion yuan, representing 26.8 times to 33.2 times estimated 2010 earnings per share. It estimated Zhongsheng's 2010 net profit at 1.15 billion yuan, more than double last year's 467 million yuan, as its network of dealerships expands and product mix improves.
Penske Automotive Group Inc, the second-biggest US dealer group, trades at 13.4 times this year's estimated earnings per share, according to data compiled by Bloomberg. Bloomfield Hills, Michigan-based Penske operates more than 310 dealership franchises, mostly in the United States and United Kingdom.
The top 10 Chinese auto dealership groups controlled 11.4 percent of China's total passenger car sales in 2008, BOCI said. It said Zhongsheng should be valued higher than its US peers because of China's surging vehicle sales and the likelihood of the largest domestic players to emerge as national leaders in a hitherto fragmented market.
The share sale is scheduled to be priced around March 12 with stock trading to start March 19, one of the people added.
Zhongsheng Chairman Huang Yi and Wang Yinggang, a Hong Kong-based spokesman for BOCI, couldn't be reached for comment. Morgan Stanley and UBS spokesmen in Hong Kong declined to comment.
