Small players brave market seeking HK$11b
May Chan and Staff Reporters
One South Korean and five mainland Chinese companies plan to kick off listings in Hong Kong, aiming to raise a total of about HK$11.47 billion.
But traders say that the euro-zone crisis and faltering US economy are dampening sentiment and deterring firms from going ahead with the mega deals the market is hoping for.
A market source close to the US$4 billion Hong Kong initial public offering of state-owned insurer People's Insurance said its July listing would be delayed until later this year.
Traders said nervousness in the Hong Kong and mainland markets had sidelined issuers and institutional investors, making it difficult for large deals to secure enough cornerstone investors to succeed.
Inner Mongolia Yitai Coal was the biggest of the eight deals braving the market next month. It opens subscriptions today, aiming to raise as much as HK$8.62 billion. Seven corporate investors, including coal users and traders as well as private-equity investors, have agreed to take 43 per cent of the shares.
A former state-owned enterprise privatised by its employees, Yitai is the first B-share company to seek a secondary listing in Hong Kong. B-share companies are mainland-listed with shares denominated in US dollars. It is offering the Hong Kong shares at HK$43 to HK$53 each, or 10.5 to 12.9 times last year's earnings per share. Its rival China Shenhua Energy trades at 9.2 times last year's earnings, while China Coal Energy trades at 6.7 times and Yanzhou Coal Mining 5.3 times.
Yitai has forecast net first-half profit of at least 3.09 billion yuan (HK$3.79 billion), and will use proceeds to fund an 8.45 billion yuan acquisition of its parent's assets.
China Yongda, the second-largest trader of luxury marques such as Audi and BMW in the mainland's east, plans to raise HK$1.67 billion, half its original fund-raising target of HK$3.37 billion last month. Its issue is due to begin trading on July 12 at an offer price of HK$6.60 a share, sharply lower than its original range of HK$7.60 to HK$10.80.
Jiangsu-based cigarette packaging company Sheen Tai also opens its public subscription today, seeking to raise HK$168 million, priced between HK$1.08 and HK$1.68 per share.
It planned to spend half of the proceeds on acquisitions, 10 per cent on expansion and 20 per cent on repaying bank loans, management said. Trading will begin on July 13.
The issue is already oversubscribed, people familiar with the deal say. An internal report expects the company's net profit growth to slow to 20 per cent this year from an annual increase of 46.2 per cent over the past three years.
Mainland high-end home textile fabric manufacturer Silverman also opens its public subscription today, planning to raise as much as HK$212 million, with shares priced between HK$1.10 and HK$1.32 apiece.
Public subscription to the shares offered by mainland ceramic sanitary distributor Bolina will also open today. It is planning to raise HK$504 million by offering its shares from HK$1.80 to HK$2.40 apiece to set up showrooms, build production facilities, acquire manufacturers and develop new materials.
The price range represents 9.1 to 12.2 times its earnings per share last year. Bolina forecasts net profit of at least 132.2 million yuan in the first half of this year. Net profit reached 160.39 million yuan last year.
Fine Holdings, a metallic component supplier with exposure to the mainland Chinese market, is the only South Korean IPO candidate. It is eyeing up to HK$294 million in fresh funds, with most of the proceeds going to expanding production capacity. The offering price range is from 68 to 98 HK cents a share.
Yesterday, two mainland companies began their public subscriptions: China Putian Food and Wanguo International Mining. They aim to raise HK$196 million and HK$315 million, respectively.