Wuzhou International, a medium-sized mainland property developer, is preparing to raise US$200 million through an initial public offering in Hong Kong.
The company, based in Wuxi, Jiangsu province, kicks off a pre-marketing campaign today after having won listing approval from the stock exchange this month, two people familiar with the deal said.
They said the pricing of the deal would offer a "meaningful" discount to the company's assets, which could reassure investors concerned by recent market volatility.
"Apart from valuations, size has become an important issue when it comes to listing, as investors prefer to buy Chinese property firms with economies of scale and nationwide coverage," said a senior banker, who had experience in handling the listing of several property firms.
That preference could be a challenge to smaller candidates with offerings of less than US$200 million, he added.
Bocom International and Macquarie are sponsoring Wuzhou's listing.
Car parts maker Mando China, the first South Korean firm to seek a listing in Hong Kong, postponed its HK$2.09 billion offering last week amid signs of adverse market conditions and poor demand for new shares.
Earlier, Triplex Biosciences, a Xiamen-based biotechnology and medical firm, also called off its US$150 million offering.
But small property developers often offer a steep discount of 60 to 70 per cent to net asset value in their listing plans, as many fail to outline a differentiated business model to compete in the highly segmented and cash-strapped operating environment.
Like many such small property firms caught in a credit squeeze, Wuzhou, which aims to develop residential shopping centres focusing on a growing middle class, is expected to seek additional capital to replenish its cash flow after becoming a publicly listed firm.
Shanghai-based property developer CIFI Holdings, which was floated in November last year, is preparing to raise US$200 million through a three-year amortising loan. Shares in CIFI have gained only 5.3 per cent since they came on the market.