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IPO

IPO

China Resources Pharmaceutical shares fall in Hong Kong trading debut

PUBLISHED : Friday, 28 October, 2016, 10:12am
UPDATED : Friday, 28 October, 2016, 1:47pm

Shares of China Resources Pharmaceutical Group fell in their trading debut in Hong Kong as one of the largest initial public offerings in the city this year failed to garner investor interest.

Shares of the Beijing-based company began changing hands unchanged at HK$9.10 per share, before dropping as much as 3.8 per cent amid a declining stock market. It erased some earlier losses to end the lunch break at HK$8.95, down 1.64 per cent, while the benchmark Hang Seng Index dipped 0.42 per cent.

Investors’ appetite was lukewarm towards the shares in the grey market ahead of Friday’s trading debut, opening at HK$8.5, down 6.6 per cent from the listing price of HK$$9.1, according to PhillipMart data.

“Such pharmaceutical stocks, though with decent fundamentals, are not in fashion now. Investors are now seeking tech companies with high growth momentum,” said Louis Tse Ming-kwong, a director of VC Brokerage. “Plus, there have been plenty of listed drugmakers in Hong Kong, so people face a raft of them.”

Analysts said market participants might also have planned to set aside some money for the upcoming IPOs over the rest of the year, leaving less capital available for investing in CR Pharmaceutical. Chinese food company Zhouheiya, famous for its spicy dried-duck snacks, is slated for public listing on November 11 in a bid to raise up to HK$3.33 billion.

CR Pharmaceutical said its public offering of shares was “slightly oversubscribed” in Hong Kong, at a price set at HK$9.10 – near the middle of its HK$8.45-HK$10.15 marketed range.

The drugmaker’s Hong Kong-listed peers Shanghai Pharmaceuticals Holding lost 3.33 per cent to HK$20.30, while Sino Biopharmaceutical slipped 1.08 per cent HK$5.49 by midday.

As this state-owned firm is still undergoing consolidation, it should have been better if the public listing took place later
Shi Licheng, Dingchen Pharmaceutical Management Consulting

CR Pharmaceutical, which has three major Shenzhen-listed drugmakers under its umbrella – CR Sanjiu, CR Double-Crane and CR Dong-E – specialises in making and distributing drugs ranging from traditional Chinese medicines like donkey-hide gelatin to Western medicines.

Shi Licheng, founder of Dingchen Pharmaceutical Management Consulting, said CR Pharmaceutical’s growth over the past a few years had lost its steam, as it has lagged behind rivals such as Fosun Pharmaceutical in research and development of new products and corporate governance efficiency.

“As this state-owned firm is still undergoing consolidation, it should have been better if the public listing took place later,” said Shi.

China Life Insurance, the country’s largest insurer, and the Japanese multinational Fujifilm

Corporation, are among the big-name companies that have committed to buying stakes as cornerstone investors.

The insurer declined 1.41 per cent to HK$19.51 in Hong Kong in morning trading.

Last month, Postal Savings Bank of China’s US$7.3 billion initial public offering, the world’s biggest in two years, quickly became one of the worst debuting performers among giant IPOs, as investors shunned the stock for its high valuation.

CR Pharmaceutical said 45 per cent of the multibillion dollar IPO proceeds was expected to fund acquisitions, with another 15 per cent to be channelled into development of warehouses and logistics centres.

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