By Leslie Richardson
Hong Kong’s IPO market kept its place as one of the top global markets in the first half of 2014. The exchange raised $11.5 billion on 48 deals for a 187% increase over the first half of 2013. Aiding Hong Kong’s strong momentum was HK Electric Investment (HK:2638), the largest global IPO during the first quarter which raised $3.1 billion. Other major listings include China CNR Corp (HK:6199), the world’s largest train maker by sales which raised $1.2 billion, Harbin Bank (HK:6138) which raised $1.1 billion, Tianhe Chemical (HK:1619), which raised $654 million and Qingdao Port International (HK:6198) Co, which runs the world’s eighth largest container port and raised $377 million. The top performing IPOs so far this year are Perfect Optronics Ltd (HK:8311), Wang Tai Holdings Ltd (HK:1400) and real estate company Redco Properties Group Ltd. (HK:1622) which are up 217.0%, 89.5% and 31/0%, respectively, from their IPO price.
In February, the first Chinese stock delisted in the U.S. went public. Listed in the U.S. as Gushan Environmental Energy Ltd., the company raised $70.5 million in net proceeds in Hong Kong through its holding company China Metal Resources Utilization Ltd. (HK:1636). The company’s founder and chairman, Yu Jiangqiu, paid $21 million to take Gushan private in October 2012, he then transformed the company’s strategy to increase focus on building its copper recycling business while reducing focus on its biodiesel operations. China Metal Resources Utilization Ltd., raised almost 10 times its take-private valuation as the IPO was oversubscribed by over 17 times with more than 4,000 subscribers signed up for shares. Even though the stock fell over 6% on its first day of trading, as of June 30, the stock is up 8.2%. Following the China Metal Resources IPO, another previously U.S. listed Chinese company, the Chinese display advertising company, Focus Media, announced its plans to list in Hong Kong. Focus Media, was taken private in May 2013 by a consortium of private equity investors in conjunction with company management, is expected to list towards the end of 2014 or early 2015 and raise up to $1 billion. The privatization deal valued the company at $3.8 billion.
While the HKEX saw an increase in funds raised during the first half of the year, the exchange did experience a few major setbacks including Alibaba’s announcement to list on the NYSE and the postponement of highly anticipated IPOs from WH Group and AS Watson. The world biggest pork producer, WH Group, decided to postpone its planned April listing after cutting the deal by two-thirds from around $5.3 billion to $1.9 billion on weak demand. Retailing unit AS Watson switched from its plan to raise $6 billion through a public listing to sell a $6 billion stake in its company to Singapore’s Temasek.
In spite of the setbacks, expectations are for a stronger IPO market in the second half of the year due to improved global liquidity, sustained recovery of European economies and continued strong performance in the U.S. capital markets. Noteworthy IPOs includes $2 billion offerings by China General Nuclear Power Corp, China Railway Materials Co, the Bank of Shanghai and China National Biotec Group, as well as a proposed $5.5 billion listing by China Guangfa Bank. Two Chinese dairy firms, Shengmu Organic Milk Ltd. and Beijing Sunlon, are planning to raise as much as $1.3 billion combined through an IPO this year, tapping into investor demand for access to China’s fast-growing dairy industry. Smaller size deals include Chinese property management company, Colour Life Services Group Co. (HK:1778), which is seeking to raise up to $148 million and Tian Ge Interactive Holdings Ltd., operator of a social-media video platform with live video content ranging from music to talk shows, which is raising up to $208 million. China Auto Rental, China’s top car rental site and service, recently filed to raise $400 million in Hong Kong with the intention of using about 70 percent of the proceeds to purchase new cars. The company, which is 20 percent owned by Hertz (NYSE:HTZ), has expanded to 55,400 self-drive rentals from just a few hundred in 2009. Beijing-based Guorui Properties Ltd is hoping to raise $242 million from buyers who are interested in China’s real estate market. China hotel trust Jinmao Investments and Jinmao (China) Investments Holdings (HK:6139), recently started taking orders for its $437 million IPO in Hong Kong, and Yida China Holdings and the developer of the successful chain of Dalian Software Park (DLSP) projects across China is planning a listing that could bring in as much as $219 million.
Hong Kong has been widely known for some time as actively promoting itself as a gateway to China for foreign investors as there are more than 800 PRC companies listed on the HKEX with a total market capital of $1.76 trillion. With the recent introduction of the Shanghai-Hong Kong Stock Connect pilot program and the availability of mutual stock market access between Hong Kong and the Mainland, Hong Kong is poised to make substantial headway in consolidating its position as the gateway for Chinese outbound investment. Furthermore, China’s IPO market has been on again, off again during the year as it started out with a boom of new listings after a 15-month freeze during which the China Securities Regulatory Commission (CSRC) tried to overhaul rules. The CSRC allowed 48 companies to list in January and February before again halting new listing to implement some key amendments. China has since reopened its IPO market stating that it was planning about 100 new listings this year, for a total of 150 IPO for 2014 or only half the number originally anticipated by investors. Currently there are around 670 companies awaiting approval for first-time share sales, according to EY. The long queue of companies waiting to list could drive more IPO candidates to list in overseas markets such as Hong Kong. Additionally, CSRC said it is considering abolishing a policy requiring mainland companies planning a listing in Hong Kong to first seek approval from the regulator making it easier and faster for mainland companies to raise capital on the Hong Kong stock exchange in the future.
Editors Note: Editors Note: Ms. Leslie Richardson has over 20 years of investment management and equity research experience. She operates a boutique investor relations firm in Hong Kong for Asian companies listed in the U.S. and Hong Kong. She also assists private companies develop investment material and build an investor following in preparation for a public listing. Additionally, she is the Asian Correspondent for MicroCap Review,www.microcapreview.com, a financial magazine focused on mircocap companies. Previously, she worked for CCG Elite in assisting Asian-based, U.S. listed clients formulate key communication strategies. Ms. Richardson began her investment career at U.S. Trust Company then went on to join Odyssey Advisors as a portfolio manager and Director of Research. Ms. Richardson specialized in high growth sectors such as bio-tech, alternative energy, IT and telecommunications. She earned her M.B.A. from the University of Southern California. Ms. Richardson is based in Hong Kong. www.elite-ir.com
© 2017 Stock News Now
Supported by Superior Web Solutions