Two mainland property firms trying to list on the Hong Kong stock exchange have fallen victim to investor fatigue with the high-risk sector.
Retail investors had placed orders for fewer than half the shares allotted to them by Mingfa Group (International), a Fujian developer attempting to raise HK$3.41 billion, people close to Mingfa said.
They said the developer was weighing its options and would decide today whether to pull the deal, which had been set for November 3.
Shenzhen residential and commercial property developer Excellence Real Estate Group announced on Tuesday night that it had postponed its share offering to raise up to HK$7.8 billion.
Investors and financiers said both companies were overvalued in a market that had been hit by a deluge of attempted share offerings from mainland builders.
“There is too much supply [of new property shares], and recent listings in this sector are already under water,” said Paul Pong, the managing director of Pegasus Fund Managers.
Mainland developers are risky investments because the central government is fretting about soaring property prices. Many builders make all their money from pre-selling flats and do not have regular rental income streams to see them through bad times.
Shares in Shanghai developer Glorious Property Holdings, which began trading in Hong Kong at HK$3.59 each on October 2, languished yesterday at HK$3.36.
Mingfa, which declined to comment, was scheduled to finalise the launch price of its shares last night but did not do so. The developer was aiming to sell its stock at between HK$3.03 and HK$3.79. This valued the company at 40 times its expected earnings for this year, Sun Hung Kai Financial research published on October 20 said, compared with 12.5 times earnings for Hong Kong-listed mainland developers.
A spokesman for Phillip Securities said retail investors had pre-booked just HK$2.5 million of Mingfa’s shares to trade on margin.
Investors said Excellence, the mainland’s largest non-government commercial property developer, was a good business.
“But the management wanted far too much for the shares,” one fund manager said. Excellence was aiming to sell shares at between HK$2.10 and HK$2.60 in a deal set for November 3. This represented a ratio of up to 9.3 times the developer’s expected earnings next year.
In the coming weeks, Fujian developer Yuzhou Properties will attempt to raise HK$2.22 billion on the Hong Kong exchange. Beijing’s Longfor Properties will try to raise up to HK$7.75 billion. Shenzhen developer Fantasia Holdings wants about HK$3.9 billion.
One property flotation that could succeed is that of Guangzhou-based Evergrande Real Estate Group, which hopes to raise up to HK$6.46 billion and will set the launch price for its shares this morning.
Banking advisers slashed Evergrande’s expected market value to between HK$45 billion and HK$60 billion. This represented a bargain-basement discount to net asset value of up to 56 per cent and a price-earnings multiple as low as 4.7 times next year’s expected earnings.
One of Evergrande’s sponsors, BOCI Holdings, has also pledged to buy up to US$250 million of the stock that the company cannot sell.
Retail investors have leaped on the deal, even though Evergrande’s land bank includes an undeveloped estuary site near Shanghai that is only accessible by air or sea, and neglected slums in Guangzhou.
Phillip Securities said it had booked HK$930 million of on-margin orders for Evergrande stock from eager punters.
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Investors shun mainland developers’ share sales
Excellence postpones IPO; Mingfa retail issue 50pc subscribed
Naomi Rovnick
29 October 2009
Two mainland property firms trying to list on the Hong Kong stock exchange have fallen victim to investor fatigue with the high-risk sector.
Retail investors had placed orders for fewer than half the shares allotted to them by Mingfa Group (International), a Fujian developer attempting to raise HK$3.41 billion, people close to Mingfa said.
They said the developer was weighing its options and would decide today whether to pull the deal, which had been set for November 3.
Shenzhen residential and commercial property developer Excellence Real Estate Group announced on Tuesday night that it had postponed its share offering to raise up to HK$7.8 billion.
Investors and financiers said both companies were overvalued in a market that had been hit by a deluge of attempted share offerings from mainland builders.
“There is too much supply [of new property shares], and recent listings in this sector are already under water,” said Paul Pong, the managing director of Pegasus Fund Managers.
Mainland developers are risky investments because the central government is fretting about soaring property prices. Many builders make all their money from pre-selling flats and do not have regular rental income streams to see them through bad times.
Shares in Shanghai developer Glorious Property Holdings, which began trading in Hong Kong at HK$3.59 each on October 2, languished yesterday at HK$3.36.
Mingfa, which declined to comment, was scheduled to finalise the launch price of its shares last night but did not do so. The developer was aiming to sell its stock at between HK$3.03 and HK$3.79. This valued the company at 40 times its expected earnings for this year, Sun Hung Kai Financial research published on October 20 said, compared with 12.5 times earnings for Hong Kong-listed mainland developers.
A spokesman for Phillip Securities said retail investors had pre-booked just HK$2.5 million of Mingfa’s shares to trade on margin.
Investors said Excellence, the mainland’s largest non-government commercial property developer, was a good business.
“But the management wanted far too much for the shares,” one fund manager said. Excellence was aiming to sell shares at between HK$2.10 and HK$2.60 in a deal set for November 3. This represented a ratio of up to 9.3 times the developer’s expected earnings next year.
In the coming weeks, Fujian developer Yuzhou Properties will attempt to raise HK$2.22 billion on the Hong Kong exchange. Beijing’s Longfor Properties will try to raise up to HK$7.75 billion. Shenzhen developer Fantasia Holdings wants about HK$3.9 billion.
One property flotation that could succeed is that of Guangzhou-based Evergrande Real Estate Group, which hopes to raise up to HK$6.46 billion and will set the launch price for its shares this morning.
Banking advisers slashed Evergrande’s expected market value to between HK$45 billion and HK$60 billion. This represented a bargain-basement discount to net asset value of up to 56 per cent and a price-earnings multiple as low as 4.7 times next year’s expected earnings.
One of Evergrande’s sponsors, BOCI Holdings, has also pledged to buy up to US$250 million of the stock that the company cannot sell.
Retail investors have leaped on the deal, even though Evergrande’s land bank includes an undeveloped estuary site near Shanghai that is only accessible by air or sea, and neglected slums in Guangzhou.
Phillip Securities said it had booked HK$930 million of on-margin orders for Evergrande stock from eager punters.
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