Image: Reuters Berita 24 English - United Imaging Healthcare Co.'s shares rose as much as 75% on their first day of trading in Shanghai ...
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| Image: Reuters |
Berita 24 English - United Imaging Healthcare Co.'s shares rose as much as 75% on their first day of trading in Shanghai on Monday. This was after the Chinese company's $1.6 billion initial public offering (IPO), which was the biggest tech-focused IPO on China's STAR Market so far this year.
Analysts said that investors saw the diagnostic imaging device maker as a safe haven in a country where growth isn't looking good. This is why there was a lot of interest in the share sale, which was the third-largest in China this year.
At the end of the day, shares of the company, which is the biggest domestic player in its field, were up 65% to 181.2 yuan.
Yang Hongxun, an analyst at investment firm Shandong Shenguang, said that the rise was caused by both the company's fundamentals and the fact that there was a lot of money in the market. In China, big offerings have done well, and in the first half of the year, the country raised more money than any other country in the world.
"The market is not short of cash, and the mood is getting better," Yang said.
In an effort to boost its slowing economy, China cut its benchmark lending rate on Monday. This came after the country took steps to make things easier last week, which included raising the main benchmark by 0.7%.
Yang also said that United Imaging "will also be a must-buy for institutions" because it is the leader in its field, plays a role in China's plan to replace foreign technologies with domestic ones, and might be included in major indexes.
United Imaging sold 100 million shares at 109.88 yuan each this month, bringing in a total of 10.99 billion yuan ($1.62 billion). The offer was more than 3,500 times oversubscribed by retail investors.
HOMEGROWN LEADER
Coronavirus outbreaks in China have helped the medical technology company, which competes with the health care divisions of General Electric Co, Siemens AG, and Philips NV, sell more scanning and imaging devices.
The money from the IPO, which Reuters says is China's third-largest so far this year, will be used to pay for research and development, production, and marketing, according to the IPO prospectus.
In the sale, the price of the stock was 78 times its earnings, which is more than double the average of 35 for the industry. During the first five trading sessions, there will be no price cap. After that, price changes will be limited to a range of 20%.
The IPO was backed by both CITIC Securities and China International Capital Corporation (CICC). They worked together with Haitong Securities as joint underwriters.
The future looked good for United Imaging, according to domestic brokerages.
Industrial Securities said that, as China's homegrown leader in diagnostic imaging devices, United Imaging would benefit from localization in the sector to compete with companies from other countries. This would be helped by good government policies.
The stock was first covered by Sinolink Securities, which gave it a "buy" rating and set a price target of 140.3 yuan, which was a lot less than what it was trading at on Monday.
But United Imaging warned that revenue growth from imaging devices might slow down in the future because COVID-19 testing methods, vaccines, and drugs are getting better and less people need them.
Analysts say that the industry could also be at risk if President Xi Jinping's "Common Prosperity" plan leads to price controls by the government.
"The company might be put under more pressure to lower prices if more cities or the central government adopt a centralised procurement policy for large healthcare equipment," said Industrial Securities in a note.
