China stock market

Not what Ping An Good Doctor ordered as shares fall below IPO price

Concerns about profitability, global sell-off in tech shares to blame, says analyst

PUBLISHED : Monday, 07 May, 2018, 12:30pm
UPDATED : Monday, 07 May, 2018, 10:50pm

Ping An Healthcare and Technology, Hong Kong’s most sought-after initial public offering in about a decade, has investors running for cover.

Shares in the unit, which was spun off from Ping An Insurance Group and is also known as Ping An Good Doctor, dropped by as much as 11 per cent to HK$48.90 on Monday, their second day of trading. This has sent the stock well below its offer price of HK$54.80.

The retail tranche of Ping An Good Doctor stocks was oversubscribed by 654 times, and on their debut on Friday, the shares rose by as much as 7.1 per cent – before giving up all their gains at the close.

Good Doctor trades briskly on debut, but ends flat after raising US$1.1b in biggest IPO this year

Ping An Good Doctor’s weak showing underscores investor concern about the company’s ability to return to profit in the future, amid a global sell-off in technology shares, according to Chen Hao, a strategist at KGI Securities in Shanghai.

“There are some institutional investors who chose to sell the shares to lock in profits, or get back their principals,” he said. “They seem not to recognise the company’s current valuation and they have their concern that it’s still not profitable. They are taking a very cautious approach to technology stocks now, against the backdrop of the recent turmoil in the sector.”

Ping An Good Doctor recently traded 3.7 per cent lower at HK$52.75, which values the company at HK$56.3 billion (US$7.2 billion) in market capitalisation. It is now ranked as the fifth-largest technology company on the Hong Kong stock market in terms of market value, according to Bloomberg data.

The company, which raised US$1.1 billion from its flotation, is still struggling to make a profit. It posted a net loss of 1 billion yuan (US$157.5 million) in 2017, its third straight year of annual losses.

Ping An Good Doctor prices US$1.12 billion IPO at top end amid retail frenzy

There are some institutional investors who chose to sell the shares to lock in profits, or get back their principals
Chen Hao, strategist, KGI Securities

The dampened enthusiasm for the stock comes as a global sell-off in technology companies spills over into the Hong Kong market, with some bellwether companies trailing earnings estimates. China is also embroiled in a trade stand-off with the United States.

None of the biggest Hong Kong-listed technology companies have fared well this quarter. Tencent Holdings, the largest in market value, has slid by 7.2 per cent since April, while Apple suppliers Sunny Optical Technology Group has shed 7.1 per cent and AAC Technologies Holdings is down by 20 per cent.

Unlike the mainland market, where IPOs typically surge after their debuts, the Hong Kong market has already grown accustomed to the breach of offer prices. Shares in ZhongAn Online P&C Insurance, for instance, are down by 15 per cent since its listing in September.