Microfinance business sees IPO as driver

Updated: 2013-12-20 13:00

By Jack Freifelder in New York (China Daily USA)

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More than four months ago, China Commercial Credit, Inc (CCC) became China's first US exchange-listed microfinance company.

"One of the reasons for going public was the sustainable and long-term development of the company," CEO Qin Huichun told China Daily on Tuesday in an interview. "If we can acquire foreign banks, we can introduce them to free-trade zones in China. It's only a matter of time."

CCC, founded in 2008, is a microcredit company that provides business loans and other loan services to more than 350 small-to-medium businesses, farmers and individuals based in Wujiang, Jiangsu province.

The company raised $9 million in its Aug 13 initial public offering on NASDAQ by selling 1.4 million shares at $6.50 per share. On Friday, the stock (listed as CCCR) closed at $8.09.

In September, CCC announced the establishment of an equipment-leasing company, Pride Financial Leasing Co, which offers leases on hardware and machinery to government agencies, hospitals and other companies in and around Jiangsu province.

"The revenue scale will be determined by the project sources we provide," said Qin in reference to the new equipment-leasing business. "I think we can target to provide $33 million to $49 million (200-300 million yuan) projects, which will generate income of $1.3 million to $2.4 million (8 to 15 million yuan)."

Jeff Papp, a senior analyst at Oberweis Funds - an independent investment-management firm in Milwaukee - noted the importance of brand recognition for any Chinese company listing abroad.

"The branding method is very powerful within their local markets," Papp told China Daily. "We've seen companies that have listed here with traditional IPOs on the NASDAQ, and they go back and publicize within China with the hope of getting some consumer response."

"The capital markets in the East have been closed for some time, so there's a long queue to list," Papp said. "That leads to the US markets where, over time, there have been far more avenues to list even with a nontraditional IPO."

Josef Schuster - founder of Ipox Schuster LLC, an independent financial-services firm in Chicago - sees CCC's IPO as a pragmatic one.

"Chinese IPOs come here, especially in the technology center, because there is a demand," Schuster said. "That's kind of the goal of almost every Chinese entrepreneur, to seek a listing abroad and in the United States. The venture capital backing makes the US a natural choice for them, much more than the domestic market."

Papp said one of the "broad issues" for CCC to overcome is that "lending in a place like China is viewed as very risky."

Schuster said he sees the prospects for CCC's growth but also cautioned about listing in the US.

"While the listing in the US brings benefits, it also brings scrutiny," Schuster said. "For the company itself, there is an initial benefit for branding. I think it was a good decision for it."

Wan Li contributed to this story.

Contact the writer at jackfreifelder@chinadailyusa.com

(China Daily USA 12/20/2013 page11)