Strong demand shows that Hong Kong IPOs still coveted
Top-end pricing indicates demand; no investor fatigue despite IPO surge
Reuters 13 November 2009
(HONG KONG) Strong demand for a piece of a China property company and a brokerage shows that selected initial public offerings (IPOs) are still being coveted despite investor fatigue with the surge of new listings.
Chinese property developer Longfor Properties Co raised US$912 million yesterday, pricing its Hong Kong initial public offering at the top end of an indicated range, according to two sources close to the deal.
Billionaire investor George Soros bought HK$200 million (S$35.8 million) worth of shares, while the US$293 billion sovereign fund China Investment Corp (CIC) also invested through the international tranche, another source said.
‘Underwriters try to use tycoons or well-known cornerstone investors to appeal to the market and draw investors to the Chinese real estate offerings,’ said Steven Leung, director of institutional sales at UOB-Kay Hian.
Hong Kong stocks rose to 15-month highs on Wednesday, which, Mr. Leung said, makes investors shift to IPOs as their valuations are lower than listed companies.
Asia has emerged as the world’s top spot for companies tapping markets for funds this year as the region’s economies inch out of recession, though the abundant supply is also keeping high price expectations in check.
Longfor sold one billion shares, or 20 per cent of its enlarged share capital, at HK$7.07 each, compared with an indicative range of HK$6.06 to HK$7.10, according to the sources.
The pricing near the top end of the range indicates that there is still demand for Chinese property IPOs despite a glut of offerings in the last few months.
Separately, China Merchants Securities Co, which plans to raise up to 11.1 billion yuan (S$2.3 billion) through an initial public share offer in Shanghai, yesterday said that its IPO has been nearly 94 times subscribed.
The medium-sized brokerage said in an exchange filing that it plans to sell 358.55 million shares at 31 yuan apiece, the top end of an indicated price range, in China’s third brokerage IPO.
Longfor’s offering price range represented a multiple of about 12 to 14 times forecast 2010 earnings. By comparison, peer R&F trades at 11 times 2010 forecast earnings, and Greentown China trades at 9.9 times forecast 2010 earnings.
The deal has attracted about US$10 billion worth of orders, or about 12 times the number of shares earmarked for institutional investors, in which more than half are long-term funds and hedge funds, another source close to the deal said.
The company also generated orders for 56 times the shares initially on offer for Hong Kong retail investors. It will trigger the clawback option to increase the retail portion of the global offering to 40 per cent from an initial 10 per cent.
Longfor has signed up five cornerstone investors, including Government of Singapore Investment Corp, Temasek Holdings, Hong Kong Land, China’s Ping An Insurance and Bank of China Group Investment Ltd, for a combined US$197.5 million worth of shares.
Longfor is only one of several IPOs hitting the Hong Kong market in the next few weeks, as offerings ranging from US$300 million to US$3 billion queue up for debuts before the year end.
Another Chinese property developer Fantasia, which plans to raise up to US$414 million from a Hong Kong IPO, saw its international portion five times oversubscribed, another source close to the deal said. Its Hong Kong retail offering portion was launched yesterday.
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Strong demand shows that Hong Kong IPOs still coveted
Top-end pricing indicates demand; no investor fatigue despite IPO surge
Reuters
13 November 2009
(HONG KONG) Strong demand for a piece of a China property company and a brokerage shows that selected initial public offerings (IPOs) are still being coveted despite investor fatigue with the surge of new listings.
Chinese property developer Longfor Properties Co raised US$912 million yesterday, pricing its Hong Kong initial public offering at the top end of an indicated range, according to two sources close to the deal.
Billionaire investor George Soros bought HK$200 million (S$35.8 million) worth of shares, while the US$293 billion sovereign fund China Investment Corp (CIC) also invested through the international tranche, another source said.
‘Underwriters try to use tycoons or well-known cornerstone investors to appeal to the market and draw investors to the Chinese real estate offerings,’ said Steven Leung, director of institutional sales at UOB-Kay Hian.
Hong Kong stocks rose to 15-month highs on Wednesday, which, Mr. Leung said, makes investors shift to IPOs as their valuations are lower than listed companies.
Asia has emerged as the world’s top spot for companies tapping markets for funds this year as the region’s economies inch out of recession, though the abundant supply is also keeping high price expectations in check.
Longfor sold one billion shares, or 20 per cent of its enlarged share capital, at HK$7.07 each, compared with an indicative range of HK$6.06 to HK$7.10, according to the sources.
The pricing near the top end of the range indicates that there is still demand for Chinese property IPOs despite a glut of offerings in the last few months.
Separately, China Merchants Securities Co, which plans to raise up to 11.1 billion yuan (S$2.3 billion) through an initial public share offer in Shanghai, yesterday said that its IPO has been nearly 94 times subscribed.
The medium-sized brokerage said in an exchange filing that it plans to sell 358.55 million shares at 31 yuan apiece, the top end of an indicated price range, in China’s third brokerage IPO.
Longfor’s offering price range represented a multiple of about 12 to 14 times forecast 2010 earnings. By comparison, peer R&F trades at 11 times 2010 forecast earnings, and Greentown China trades at 9.9 times forecast 2010 earnings.
The deal has attracted about US$10 billion worth of orders, or about 12 times the number of shares earmarked for institutional investors, in which more than half are long-term funds and hedge funds, another source close to the deal said.
The company also generated orders for 56 times the shares initially on offer for Hong Kong retail investors. It will trigger the clawback option to increase the retail portion of the global offering to 40 per cent from an initial 10 per cent.
Longfor has signed up five cornerstone investors, including Government of Singapore Investment Corp, Temasek Holdings, Hong Kong Land, China’s Ping An Insurance and Bank of China Group Investment Ltd, for a combined US$197.5 million worth of shares.
Longfor is only one of several IPOs hitting the Hong Kong market in the next few weeks, as offerings ranging from US$300 million to US$3 billion queue up for debuts before the year end.
Another Chinese property developer Fantasia, which plans to raise up to US$414 million from a Hong Kong IPO, saw its international portion five times oversubscribed, another source close to the deal said. Its Hong Kong retail offering portion was launched yesterday.
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