China National Offshore Oil launches IPO as A-share goes one step further

China National Offshore Oil Corporation (hereinafter referred to as CNOOC, 600938.SH) launched its IPO on March 31. This means that the "three barrels of oil" will soon complete their "rendezvous" in the A-share.

As a Hong Kong red-chip IPO company, CNOOC comes with a number of issues that have attracted attention - how big is the fundraising? What is the impact on current market liquidity? How does the huge fluctuation in oil prices affect performance? Are international geopolitical risks affecting the company's business?

"According to the prospectus information previously disclosed by CNOOC, the proposed issue of 2.99 billion shares (including the over-allotment option, that is, the "green shoe"), to be invested in raising funds of up to 35 billion yuan, excluding the over-allotment option part corresponds to about 2.6 billion shares, raising funds of 30.4 billion yuan. Previously China Mobile, China Telecom back to A fund-raising scale are more than 50 billion."

A large brokerage industry researcher said to the first financial analysis, due to the above plan fund-raising scale of about 15 billion is a strategic placement, the market public offering scale is relatively small.

In March, the average daily turnover of the Shanghai and Shenzhen markets was 101.49 billion yuan, and in his view, the scale of circulation of CNOOC's offering is expected to have a more limited impact on the market.

For the current market overall situation, CITIC Securities chief strategy analyst Qin Pejing 31 evening interview with the first financial said, the epidemic in the past two weeks on the economy, the need and urgency of the stabilization of growth policies to power up quickly, a number of policy combinations are expected to be gradually launched and form a synergy, the second quarter economy will gradually repair.

The size of the fundraising "half with war investors"

CNOOC's return to the A-listing was sponsored by CITIC Securities and co-lead underwriters, with the other two co-lead underwriters being CICC and BOC International.

On February 24 this year, CNOOC's IPO on the main board of the SSE was approved, and on March 30, the company received approval for the issue. The company announced its prospectus on the 31st, after which it will launch the enquiry and subscription.

The prospectus shows that CNOOC plans to issue 2.6 billion shares, accounting for approximately 5.50% of the total share capital of the company after the issue (before the exercise of the over-allotment option), all of which are new shares to be issued publicly, without transfer of old shares.

The issuer granted the sponsor (joint lead underwriter) an over-allotment option of not more than 15.00% of the initial issue size. If the over-allotment option is exercised in full, the total number of shares issued will be expanded to 2.99 billion, accounting for approximately 6.28% of the total share capital after the issue (after the over-allotment option is exercised in full).

The aforementioned researcher told reporters that, according to 2.99 billion shares, the maximum amount of fund-raising projects invested in 35 billion yuan, excluding the over-allotment option part corresponds to about 2.6 billion shares, raising funds of 30.4 billion yuan.

However, with reference to the China Mobile A-share IPO, it is expected that the 2.6 billion shares issued before the green shoe, there will be nearly 50% of the shares issued by the strategic placement, nearly 35% of the shares issued by the offline subscriptions, strategic investors will be allocated shares will be locked for 1 to 3 years to be listed in circulation, while 70% of the offline subscriptions will be locked for 6 months to be listed in circulation, so it is expected that the 2.6 billion shares issued before the green shoe, there will only be about 15 per cent, corresponding to about 390 million shares in the issue, will be floated within the first six months after the issue.

According to his calculations, if we look at the maximum fundraising of $35 billion, the price is equivalent to about 1.08 times the company's net asset value of $10.80 per share at the end of 2021, which would give the company a total market capitalisation of about RMB557 billion after the issue, corresponding to a P/E ratio of about 7.9 times in 2021.

"And according to Bloomberg consensus estimates, the current P/E and P/N ratios of US and European listed oil companies in 2021 are about 12 times to 20 times and 2.8 times to 3 times respectively." He told reporters.