Oi Wah Pawnshop Credit, the most popular initial public offering in Hong Kong by far this year, surged yesterday on its trading debut.
Its performance sparked listing hopes among local companies amid positive market sentiment towards small-cap firms.
The pawnshop operator, which has been providing quick cash to Hongkongers since 1975, is the first among nearly 150 pawnshops in the city to achieve a listing on the local bourse.
"Following the Tsui Wah IPO, Oi Wah's listing again reflected investors' enthusiasm for branded local names, underpinned by inexpensive valuation and a good 'Hong Kong concept'," a fund manager said.
Oi Wah was the stock that rose most yesterday in Hong Kong. Its shares surged 34 per cent to finish at HK$1.31 after jumping as much as 45 per cent during the day. The benchmark Hang Seng Index lost 0.9 per cent.
The IPO was Hong Kong's most enthusiastically embraced this year, its retail tranche being oversubscribed by more than 1,000 times.
The tiny IPO, which raised just HK$98 million, got the attention not only of retail investors but also of deep-pocketed big mainland investors, including the government-backed Social Security Fund, China Life and Harvest Fund Management, two people familiar with the deal said.
"It could be deemed a cheap buy, as Oi Wah's valuation is cheaper than that of most of its US and Singapore peers, which trade at a price-to-forward-earnings ratio of about 16 times," said an investment banker who refused to be named.
The firm priced its shares at HK$0.98 a share, representing about 11.8 times forward P/E. After yesterday's rally, the valuation stood at about 15 times forward P/E.
A pawnshop operator provides cash in return for valuables such as gold, jewellery, diamonds and the latest electronic gadgets. Oi Wah reported HK$66.3 million in revenue and HK$33 million in profit for the 2012 financial year, which ended on February 28.
In the pipeline, the Shanghai-listed China Everbright Bank said yesterday that it would issue up to 12 billion shares in a Hong Kong listing. The bank might raise about US$1.5 billion after a planned listing this year by Bank of Shanghai, a person familiar with the deal said.