Huiyuan sets the pace with 66pc surge on debut
In a day of contrasts, China Huiyuan Juice Group made the strongest listing debut of the year while China Properties was the first new issue of 2007 to sink below its offer price, as investors chased mainland consumption plays but punished poor governance.
Shares in Huiyuan Juice, the mainland's top juice maker, surged 66 per cent to HK$9.98 - on HK$3.05 billion worth of trades - from the HK$6 it was sold at during its heavily oversubscribed initial public offering.
The gain beat the market forecast of about 55 per cent.
'Investors snapped up Huiyuan shares because it is the leader in the sector and a mainland domestic consumption play,' said Patrick Yiu Ho-yin, an associate director at CASH Asset Management. 'The overwhelming response from retail investors also showed that the stock is in great demand.'
The retail portion of the offering was 938 times subscribed, the hottest response this year, allowing the sponsors to price the offer at the top of its indicative range. The offer raised HK$2.4 billion for the Beijing-based company.
Huiyuan - in which France's Danone holds a 22.2 per cent stake - is trading at more than 50 times its 2007 forecast earnings, compared with the 30 times valuation set during its offering.
'Despite its current high valuation, the stock could advance to HK$12 in the medium-term, given its leading position in the sector,' said Castor Pang, a strategist at Sun Hung Kai Financial.
Deal sponsor UBS estimated Huiyuan would earn 300 million yuan this year, compared with an estimated 200 million yuan for 2006.
Conversely, shares in China Properties fell 3.1 per cent to HK$3.49 from the offer price of HK$3.60. All other new listings this year ended up on their first day.
Mr Pang said the drop showed that investors remained wary about the Shanghai-based developer's poor corporate governance record. Its chairman and controlling shareholder Wong Sai-chung had angered minority shareholders in 2003 by privatising the then Hong Kong-listed Pacific Concord at 65 HK cents a share, representing a 71 per cent discount to the company's net asset value, despite an independent adviser urging minority shareholders to reject the offer.
In the offering, China Properties sold 25 per cent of its enlarged share capital at the low end - at HK$3.60 each - due to the poor investor response. The retail portion was only eight times oversubscribed.
Yesterday, the Hang Seng Index closed down 97.58 points, or 0.47 per cent, to 20,711.65.