Far East Horizon hopes to raise HK$5.5b in HK listing
Financial services firm Far East Horizon is seeking to raise up to HK$5.55 billion in an initial public offering as investment sentiment weakens due to fears over Japan's nuclear crisis.
Sinochem-backed Far East Horizon lends to mainland businesses by leasing contracts that allow the lessees to sell their assets to Far East Horizon and make rental payments instead of financing charges.
To raise the cash to pay for the customers' assets, Far East Horizon borrows from banks and then generates revenues from rental payments, which exceed its borrowing costs.
About 80 per cent of the firm's customers come from the printing, shipping, machinery and infrastructure construction industries and are small to medium-sized enterprises. The rest are large corporations.
The leasing company, which counts state-owned Sinochem Group as its controlling shareholder, aims to use the entire proceeds of the share sale to boost its lending business.
For the nine months to September 30 last year, revenue reached US$231 million, up 59 per cent over the same period in 2009. Net profit for the period was US$77 million, a rise of 65 per cent over the corresponding period in 2009.
For the year to December 31, 2009, non-performing loans amounted to US$23.6 million, a decrease from the previous year's US$25.6 million.
However, Far East Horizon, which is a borrower and a lender, is yet to obtain a credit rating from an independent rating agency.
Kong Fanxing, vice-chairman and chief executive of Far East Horizon, said the firm would seek a credit rating following its Hong Kong listing.
He said the company was not a 'loan shark'.
'We don't offer loans at high interest rates. It's not what we do,' said Kong. 'We have a consulting service to help our customers to plan their businesses. Many of our customers have been with us for a very long time.'
The leasing firm is facing tighter credit conditions on the mainland as the central government has instructed banks to curb lending.
Yang Lin, a non-executive director at Far East Horizon and a representative of Sinochem Group, said the state-owned company would support and use its 'influence' if necessary to secure a steady credit line for Far East Horizon.
Other significant investors of Far East Horizon include private equity firm Kohlberg Kravis Roberts & Co, Singapore's sovereign wealth fund Government of Singapore Investment Corporation and China International Capital Corporation, which is also organising the share sale.
Far East Horizon aims to join the Hong Kong stock exchange on March 30.
The equity market has turned volatile over the past few days hurting investor sentiment.
Oil equipment provider Hilong Holdings said yesterday that it would postpone its HK$1.48 billion Hong Kong listing, citing 'unforeseen adverse' market conditions. The Shanghai-based company originally planned to go public on March 24.
Compared with 2009, Far East Horizon's revenue in nine months to September last year hit US$231 million, a rise of: 59%