Modern Land tempts with discount pitch
Seeking to raise up to HK$944m, the mainland developer is offering shares in a low price range amid a tough listings market and tight credit
Mainland developer Modern Land (China) has taken a calculated risk with the launch of an initial public offering in Hong Kong amid deteriorating prospects for the global equity market.
Some analysts said the timing of the IPO reflects the company's desperation to raise cash even in a difficult market. Others believe it is making a strategic move to obtain a listing and avoid possible difficulties in securing bank loans amid an imminent credit crunch.
Modern Land aims to raise between HK$593 million and HK$944 million by offering its new shares at an indicative price range of between HK$1.49 and HK$2.36 each. The issue price represents a price-earnings ratio of between 3.5 times and 5.6 times.
"It is a rare move to offer such a low valuation and it indicates it is cash hungry," said Castor Pang, the head of research at Core Pacific-Yamaichi. If Modern Land insisted on pushing through with the IPO, he said it had no choice but to offer its assets at a steep discount.
According to the company's listing prospectus, with the difficulties in obtaining bank loans as a result of the austerity measures recently imposed on the mainland property market it had turned to non-bank financial institutions.