• First Chinese company to list on Ceinex
• IPO proceeds to help fund acquisition of Candy
• Slowing sales growth along with macro uncertainties

Listing in Frankfurt; First Chinese Company to List on Ceinex

Qingdao Haier (600690 CH) recently set the price range for its Frankfurt IPO at between EUR1 and EUR1.50 per share, planning to offer up to 304.75m new D-shares, including a potential greenshoe of up to 39.75m shares. The final price should be announced soon, and the offer could raise up to 458m euros (US$529.8m) in the Oct 24 listing.

Haier plans to list its shares on the new D-share submarket of the China Europe International Exchange, Ceinex, and it will be the first Chinese company to do so. Ceinex is a dedicated market for China-related securities and investments outside mainland China established by the Shanghai Stock Exchange and Deutsche Börse. The dilutive effect is estimated to be about ~5% of earnings.

To Fund Acquisition of Italian Household Appliance Manufacturer and Overseas Expansion

Proceeds from the IPO are planned to support an expansion in Europe and fund Haier’s acquisition of Candy, an Italian household appliance manufacturer. Haier plans to invest EUR475m (US$550m) to full acquire Candy as it looks to expand overseas. Despite being based in Italy, Candy sells more than 80% of its products (includes washing machines and fridges) outside of its home country.

Sales Slowing in China Along With Macro Uncertainties

As highlighted in our earlier report on 3 Sep, the home appliance industry has been affected by tighter housing regulations as major cities have adopted policies to contain rising home prices.

Indeed a weaker property market is expected to have a knock on effect on the home appliance industry and we are seeing a slowdown in the sector. As such, we lower our P/E from 13.5x to 11x and our FV estimate drops from RMB17.70 to RMB14.42.

However, long term prospects remain bright and the trend of consumption upgrade is expected to continue, but it is unclear when sentiment on the sector will turn more positive given current macro uncertainties relating to China.

Source: OCBC Research - 18 Oct 2018