Renhe prices share offer below target range to raise HK$3.4b

PUBLISHED : Saturday, 18 October, 2008, 12:00am
UPDATED : Saturday, 18 October, 2008, 12:00am

Renhe Commercial Holdings, which develops underground shopping centres on the mainland, raised HK$3.39 billion from an initial public offering despite the gloomy market sentiment by fixing the offer price below the bottom of an indicative range.

The volatile market over the past weeks had cast doubts over the prospects of the deal, as many investors turned cautious and stayed on the sidelines.

The Hang Seng Index has lost 3,326.47 points since Renhe began its management roadshow on September 29. The index dived 676.31 points yesterday, extending its losses to 47.67 per cent this year.

'It has been very difficult but fortunately it is almost a done deal now,' a source said.

Renhe's share sale failed to receive enough orders to cover the retail portion, which was 10 per cent of the offering, but the shortfall would be picked up by additional institutional subscriptions, sources said.

However, the firm was forced to cut its share offer price to HK$1.13 from an indicative range of between HK$1.40 and HK$1.71.

At that pricing, the deal's size has shrunk almost 34 per cent from the initially targeted HK$5.13 billion. 'The firm had to make big compromises with investors if it really wanted to get listed under such bad market conditions,' said a fund manager.

The stock's trading debut has been postponed for one week to October 22 to avoid the slumping market. A source said the firm was expected to proceed with the listing next Wednesday.

'As long as the market rout goes on, it would be extremely hard for Renhe to perform well after its trading begins,' said a banker.

Yiu Chin, a director of financial analysis at Altruist Financial Group, said although Renhe's business model was special, it was not attractive enough to support the stock.

'We do not know whether an underground shopping centre developer really has such a strong profitability as stated in the prospectus, and how long such strong [earnings] growth will last.'

Renhe logged revenue of 366.5 million yuan (HK$415.98 million) at the end of last year, up 125.32 per cent from a year earlier. Its profit for the year surged 449.97 per cent to 266.68 million yuan.

Trading headwinds

With a volatile market, the stock faces poor prospects on its debut next Wednesday

Renhe was forced to slash its share offer price to, in HK$: $1.13

The original sum the initial public share offering was supposed to raise: $5.13b