Consumer stocks top buyer's shopping lists
Mainland hypermarket chain Sun Art Retail, one of the most richly priced initial public offerings this year, surged 40.56 per cent on its debut, benefiting from a strong investor appetite for consumer stocks.
The trading on the bourse was delayed for two weeks because Sun Art failed to disclose up-to-date earnings per share figures in its listing prospectus after a stock split that took place on June 27.
Sun Art yesterday closed at HK$10.12, 40.56 per cent above its top end offer price of HK$7.20, giving the hypermarket chain a valuation of 31 times estimated earnings this year, higher than the offer valuations of Prada and Samsonite International, which also listed in Hong Kong.
Hong Kong offerings have performed poorly recently, meeting sluggish investor demand for new shares.
However, Sun Art's strong debut yesterday signalled that investors were willing to pay a premium for exposure to the growing mainland consumer market, said William Tang, managing director and head of consumer and retail group at HSBC Global Banking, one of the advisers in the Sun Art offering.
Mainland consumer stocks were particularly popular with Asian investors who were more likely to pay higher valuations, Tang said.
According to a stock exchange filing, the international portion of the offer constituted 81.3 per cent of the total number of shares available, less than the usual 90 per cent.
Orders from retail investors, who are usually allocated 10 per cent of the offering, made up the remaining 18.7 per cent of the shares sold.
'Many investors are into consumer stocks,' said Kenny Tang Sing-hing, a general manager at AMTD Financial Planning. 'As a result of the rising demand, many of the stocks in the consumer sector are now trading above a price-earnings ratio of 20.'
According to its listing prospectus, Sun Art was the largest hypermarket operator in China in terms of sales last year, with a market share of 12 per cent. It leads Wal-Mart Stores in the United States, state-owned China Resources and France's Carrefour.
However, some analysts said Sun Art was overpriced because the hypermarket business could face consolidation after years of rapid growth. The market share of the top five operators jumped to 45.1 per cent last year, compared with 34.8 per cent in 2005.
Sun Art raised a total of HK$7.97 billion in the offering to repay bank loans and boost store numbers. It operates 197 hypermarkets across 21 of China's 33 provinces.