Two firms join rush to launch share sales

At least two companies - a mainland online game maker and a local money lender - have joined a revival in the city's listing market, seeking to raise a combined US$235 million amid improving sentiment after a fall in oil prices.

Forgame, a Guangzhou-based developer of online and mobile games, began institutional book building yesterday in a bid to raise as much as US$222 million in its initial public offering.

The development came as bankers said investors' appetite for new shares had returned as Syria tensions eased and encouraging Chinese macro data boosted demand for growth stocks.

Founded in 2009, Forgame offers 31.37 million shares, of which 65 per cent are new shares, at an indicative range between HK$43.50 and HK$55 per share, translating to a price-earnings ratio of between 9.5 and 12 times next year's expected earnings.

Its valuation is in line with its US-listed Chinese rivals, including Shanda Games and Changyou.com whose shares are trading at a ratio of about 10 to 11.

Bankers said there was no cornerstone investment in Forgame's offering, but there was a group of unidentified anchor investors.

Before taking the company public, Forgame was the recipient of two rounds of pre-listing investment from a consortium of private-equity and venture-capital investors, which has committed about US$89.2 million to Forgame's equity tranche.

The company will take orders from retail investors from Thursday to next Wednesday. Pricing is slated for next Thursday and the shares are scheduled to begin trading on October 3, a term sheet shows.

CICC, JP Morgan, Macquarie and Morgan Stanley are the joint book runners for the deal.

Sentiment has been underpinned by Larry Summers' withdrawal from the running to be the next chairman of the US Federal Reserve.

Adding to the recent pickup in activity in the listing market, Hong Kong Finance, a money lender that focuses on providing mortgage loans, is looking to raise US$13 million through its initial public offering.

The funds raised are for expanding the company's business.