Two large state firms to test Hong Kong IPO market
Sinopec Engineering and Galaxy Securities off on roadshows after winning support from cornerstone players to raise US$3.8 billion
Two big state-owned enterprises launched their long-awaited initial public offerings to raise up to US$3.81 billion in Hong Kong yesterday, taking advantage of improving sentiment.
The two large offerings are expected to lift a pall over the slumbering listing market.
The pipeline is clogged with companies waiting to go public, and underwriters are looking to make up lost ground after a lacklustre year so far for new issuers.
Sinopec Engineering and China Galaxy Securities decided to launch their roadshows after they secured strong support from key cornerstone investors.
Sinopec Engineering, an engineering and construction unit of China Petrochemical, Asia's largest oil refiner, plans to raise as much as US$2.24 billion by offering 1.33 billion new shares, bankers working on the deal say.
The firm is offering the shares at an indicative range between HK$9.80 and HK$13.10 per share, or a price-book value ratio of 1.2 to 1.5 times, based on forecast asset value this year.
To ensure the success of the offering, the Beijing-based firm has secured US$350 million from seven cornerstone investors willing to accept a six-month lock-up in return for a guaranteed number of requested shares.
Sources say these cornerstone investors, including China Export & Credit Insurance, China Aerospace, China Shipping and property to energy group Zhong Rong, have together covered about 17.5 per cent of the stock offering.
Galaxy Securities, the mainland's seventh-largest brokerage firm by assets, may raise as much as US$1.57 billion through new and old shares. The old shares are worth about US$50 million to US$68 million.
The offering is priced at between HK$4.99 and HK$6.77 per share, or a price-book value ratio of 1.2 to 1.5 times, based on forecast asset value by year-end.
Its cornerstone investors include AIA, China Life Insurance, China Cinda, Genertec Capital, Sino Life Insurance and Malaysian sovereign wealth fund Khazanah Nasional.
Bankers say these cornerstone investors have placed a combined US$280 million in orders, representing about 19 per cent of the overall transaction.
The two mega listings have been deferred at least once since November last year because the issuers did not want their shares to be priced at the low end of the indicative ranges and were in tough negotiations with cornerstone investors that were looking for bargains.
Earlier this year, some smaller offerings were also delayed or cancelled because of weak investor demand.
Among them was Triplex Biosciences, a Xiamen-based biotechnology and medical firm that had planned to raise about US$150 million.