Luye Pharma IPO well received on enthusiasm for health care

Drugmaker Luye Pharma Group yesterday closed a well-received US$798 million initial public offering. The offer, which was 14.8 times subscribed, was priced at the top of the indicated range and the deal was heavily subscribed on the first day of marketing.

The deal caught a bounce from markets with favourable PMI data from the mainland this week buoying investors.

Pricing it at HK$5.92 per share was also attractive. This translated into a forward price-earnings multiple of 19.5 times, compared with 25 times for Sihuan Pharmaceutical Holdings Group, or 28 times for CSPC Pharmaceutical Group.

Cornerstone investors pre-bought US$280 million of the deal, tightening supply and stoking demand. These included Value Partners and the US health-care fund Orbimed, which took US$50 million. "They [Orbimed] are a specialist fund that validated the deal," said a banker familiar with the listing.

All this propelled demand, but mostly the deal sold well because the sector is in favour. Investors like "new economy" China stocks such as health care, perceiving them to be less sensitive to the economic growth slowdown than the industrial plays that used to define the Hong Kong listing market.

Hong Kong is also establishing itself as something of a health-care hub, with a batch of new listings in recent years including Phoenix Healthcare, China Pioneer Pharma, Shanghai Pharmaceuticals and China NT Pharma Group. This, said analysts, was helping Hong Kong develop the investor and analyst specialisation that will draw more health-care listings to the city.