UPDATE 2-China shipbuilder Rongsheng floats $1.5 bln IPO-sources

Tue May 4, 2010 4:27am EDT

* Rongsheng hires M.Stanley, JP Morgan for IPO

* Aims to raise up to $1.5 bln, less than 2008 plan

* Early investors including Goldman made profitable exit (Updates to add links to data)

By Kennix Chim and George Chen

HONG KONG, May 4 (Reuters) - Jiangsu Rongsheng Heavy Industries Co Ltd has appointed Morgan Stanley (MS.N) and JP Morgan (JPM.N) to finalise plans for its long-awaited IPO in Hong Kong, aiming to raise up to $1.5 billion in the fourth quarter, sources told Reuters on Tuesday.

This is Rongsheng's latest bid to go public after it failed to raise more than $2 billion from a planned IPO in Hong Kong in 2008, mainly as a result of the global financial crisis.

Rongsheng's early main shareholders included an Asia investment arm of Goldman Sachs (GS.N), U.S. hedge fund D.E. Shaw and New Horizon, a China fund founded by the son of Chinese Premier Wen Jiabao.

The three investors sold off their stakes in Rongsheng for a profit early this year, said the sources familiar with the situation. Representatives for the banks, funds and Rongsheng all declined to comment.

The sources declined to be identified as they were not authorised to speak to the media. ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ For Starmine comparative data: link.reuters.com/tep52k ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^

CHALLENGING TIMES

Rongsheng's revived IPO plan comes at a challenging time. Smaller domestic rival, New Century Shipbuilding, slashed its Singapore IPO in half last week, planning to raise up to $560 million from the originally planned $1.24 billion due to weak market conditions. [ID:nSGE640001]

After the reduction of the number of shares offered, New Century Shipbuilding's offering price represents a multiple of 6.5 times to 7.9 times forecast earnings for 2010.

By comparison, Singapore-listed Yangzijiang Shipbuilding's (YAZG.SI) trades at 10.3 times forecast earnings, while South Korea's Hyundai Heavy (009540.KS) trades at 7 times.

Given uncertainty in the global shipbuilding business environment as well as growing concerns over a huge flow of fund-raising events in Hong Kong, investment bankers suggest the potential size for Rongsheng could be $1 billion to $1.5 billion, according to the sources.

Investors have turned cautious on the industry after it was dealt a heavy blow by the economic downturn, with orders shrinking last year and the sector yet to fully recover.

Rongsheng is seeking to tap capital markets to fund fast growth and aims to catch up with bigger state-owned rivals such as Guangzhou Shipyard International Co Ltd (600685.SS) (0317.HK).

Rongsheng won a $484 million deal to build four ships for Oman Shipping Co last year. The vessels would carry exports from an iron ore pellet plant in northern Oman which is expected to begin production in the second half of 2010. ($1=HK$7.75) Editing by Ken Wills and Lincoln Feast)

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