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China Travel Firm Sets Low IPO Price

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A small Chinese travel company plans to go public by selling shares at half the valuation of those of its peers despite strong demand, after the securities regulator stepped up policing of stock pricing.

The low pricing comes as bankers worry that the regulator's move may lead to companies scaling back fundraising plans as initial public offerings resume after a year-long pause.

The China Securities Regulatory Commission (CSRC) on Sunday said any company pricing its shares at a premium to those of its peers must delay sales by three weeks to publish risk warnings. Seven companies have postponed IPOs since the market reopened two weeks ago.

Beijing Untour International Travel Service Co is selling up to 17 million shares at CNY23.15 yuan (USD$3.83) each, the company said in a document posted on the Shenzhen Stock Exchange website late on Monday.

The price is equivalent to 22.05 times its 2012 net profit compared with an average price-to-earnings ratio of 42.52 for its industry peers, the company said.

Beijing Untour disregarded over 96 percent of institutional investor bids when setting the price, in line with new rules specifying that all bids above the IPO price must be discounted.

The high elimination rate indicates that the IPO price was set significantly lower than institutional investors' expectations and reinforces analyst concern that regulator actions will elbow out market forces in the IPO valuation process.

Beijing Untour did not provide a reason for the low pricing.

More than 50 companies have announced plans to list on the Shanghai and Shenzhen bourses after the CSRC last month said it would permit the resumption of IPOs which it suspended in November 2012.

(Reuters)