Floating the boat

10 December 2009 By Wei Gu

It is easy to dismiss the shipping equipment maker’s $2.2 billion exuberant listing as Shanghai IPO mania, but the premium rating makes sense. China has overtaken Korea to hold the world’s largest ship order book and robust naval ambitions add extra buoyancy.

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China Shipbuilding Industry Co, the country's largest ship equipment maker, raised $2.2 billion in an IPO that was more than 400 times oversubscribed. The stock was priced at the top end of the indicated range, valuing the stock at 35 times 2009 earnings.

The Baltic Exchange's main sea freight index, which measures the cost of transporting resources by sea, hit a high in November, as production measured by the JPMorgan Global PMI rose for the fourth continuous month. About 90 percent of the world's traded goods by volume are transported by sea.

The global shipbuilding order book, by tonnage, was down 22 percent in October from last year, according to Clarksons and HSBC. China overtook South Korea in market share, with 39 percent of the total book.

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