BBMG offering 74 times covered on first day
The investor appetite for new listings continues unabated, with more than HK$44 billion worth of margin financing being arranged to buy shares in cement producer BBMG Corp on the first day of its initial public offering yesterday.
The sum was about 74 times the value of shares available in the retail sale.
The state-owned company is looking to raise up to HK$5.95 billion by offering 933 million new H shares at HK$5.18 to HK$6.38 each, a valuation of 11 to 14 times the firm's expected earnings for this year.
The public has been allocated 10 per cent, or HK$595 million worth of the shares, while the rest will go to institutional investors.
The offering is set to be one of the most popular of the year.
Phillip Securities and Sun Hung Kai Financial saw the biggest demand for BBMG shares among the five brokerages polled by the South China Morning Post, receiving orders of HK$15 billion and HK$14 billion, respectively. Phillip Securities said its margin financing quota was fully utilised within 90 minutes of the offer being opened, mostly for pre-orders that had been made three days ago.
'We received a positive response from our clients, as they are really keen on this issue. Investors are eager to bet on higher returns from investments in new share offers in light of the current low interest rate environment,' said Phillip Securities corporate finance officer Carmen Wong.
Nelson Chan, a general manager at Bright Smart Securities, said the retail offering could be at least 600 times oversubscribed, with institutional investors expected to place bulk orders for the retail sale to ensure they get an allocation.
'As the placing tranche was dominated by several well-known investors, other institutional investors have no choice but to place big orders in the public offering as a way to get more flotation shares,' Mr Chan said.
The overwhelming response from local investors will likely trigger the clawback mechanism to boost the number of shares available for public investors to the maximum of 50 per cent, up from the original 10 per cent.
Market watchers expect BBMG to rise at least 30 per cent on its trading debut.
Several recent new listings, such as Bawang International (Group) Holding, 361 Degrees International and China Metal Recycling (Holdings) have delivered solid returns on their first day of trading over the past three weeks.
BBMG's public offering will close on July 22, with trading of its shares expected to begin on July 29.
The company, one of the largest building materials manufacturers on the mainland, operates in four business segments, including cement, modern building materials, property investment and management, and property development.
Phillip Securities said it set a 12-month target price at HK$8.23, 17.8 times the firm's earnings this year and 14 times the 2010 forward price-earnings ratio.
Portion of shares open to public may be increased from 10 per cent
Amount of margin financing for shares arranged on the first day, in HK$: $44b
The HK$44 billion posted for BBMG sharaes in the form of margin financing represents an oversubscription rate of 73 times
What was made available (HK$)
Phillip Scurities: 15b
Prudential Brokerage: 7.5b
Sun Hung Kai Financial: 14b
Tai Fook Securities: 2.5b
Emperor Securities: 5b