Magnum's oversubscribed IPO latest in string of successful small caps

The closely-watched initial public offering of local nightclub and disco operator Magnum Entertainment has drawn strong interest from both institutional and retail investors following the runaway success of a slew of small-cap listings since late last year.

Established in 2007, the club operator controlled by local businessman Yip Mow-lum, the chairman of Hong Kong-listed brokerage firm Bright Smart Securities, was swamped with buying orders from investors who used margin funds to increase their purchasing power. This resulted in the IPO being oversubscribed more than 1,200 times, making it one of the biggest oversubscriptions of the past year.

The size of Magnum's offering is fairly insignificant but the share sale, estimated at between HK$84 million and HK$126 million, could be the first of its kind in Hong Kong's capital market. It may also draw a lot of interest in its unique business model given soaring rents in Lan Kwai Fong, the city's popular spot for trendy bars and eateries in Central.

Market participants said a number of fund management firms and billionaire Cheng Yu-tung's Chow Tai Fook had pledged sizeable orders for the night club listing although there was no official announcement to confirm this.

Shares of two newly listed firms - children's apparel retailer Miko International and Nanjing Sinolife, a mainland nutritional supplements retailer - surged 23 per cent and 33 per cent respectively in their trading debuts today.

Compared to disappointing mega offerings, small-sized IPOs like afterlife services firm Fu Shou Yan and a number of drug and technology stocks have surprised investors with shares trading well above their offer prices. Shares in Fu Shou Yan are up 44 per cent since listing last month, while China Everbright Bank, the biggest IPO deal for Hong Kong last year, has fallen 6 per cent.