US$15b worth of IPOs flowing into HK in next few months
(HONG KONG) Chinese real estate developer Glorious Property hopes to raise over US$1.5 billion in an IPO, joining a rush of companies seeking to list in a rebounding stock market and as home prices increase.
An estimated US$15 billion worth of IPOs are coming to Hong Kong in the next few months, with several domestic property groups looking to tap the market rebound. Many had hoped to list last year, but pulled those plans when markets tumbled.
Analysts and bankers say that while the opportunity is there, a glut of real estate IPOs may see mixed success, as investors see little difference between the offerings and the companies. Getting to market first will be an advantage.
'In some sectors, like the Chinese real estate developers, there are a lot of companies coming to market at the same time, making it difficult to differentiate between them,' said Christina Chung, senior portfolio manager with Allianz's funds unit RCM.
'Giving investors, who typically look for differentiation, a lot of choice does not help valuations.' The price range of the Glorious offering is HK$4.00-HK$5.30 per share, with a base offer size of 2.25 billion shares in total, according to a term sheet obtained by Reuters yesterday.
If Glorious prices are at the top end of the range, it will overtake China Resources Land as the second-largest Chinese property developer listed in Hong Kong by market value, ranking behind China Overseas Land and Investments, which has a market capitalisation of HK$19.1 billion.
Glorious Property was incorporated in the Cayman Islands in July 2007 and develops property mostly in China. Projects include Sunshine Holiday in Tianjin and Shanghai Bay, situated along the Huangpu River. Its first property was the Sunshine Greenland hotel in Shanghai in 1996.
The company says that as of end-July it had 19 projects in various stages of development - seven of them in Shanghai - with a total land bank of around 13.6 million square metres.
Zhang Zhi Rong, founder, chairman and controlling shareholder, has more than 13 years of experience in the industry, and before that was involved in construction materials trading and sub-contracting, the IPO prospectus said.
Glorious Property's cornerstone investors include Shanghai Industrial Holdings Ltd and a subsidiary of Sino-Ocean Land Holdings Ltd, which will invest US$50 million and US$30 million respectively.
The offering's roadshow begins this week, with bankers shopping the IPO to institutional investors to gauge demand and determine the ultimate price.
A successful IPO would allow Glorious Property to raise cash and pay back investors.
Fellow developer Evergrande also plans to raise an estimated US$1.5 billion, with other Chinese real estate companies also in the IPO pipeline. UBS AG, JPMorgan Chase and Deutsche Bank are handling the Glorious offering.
The final price of the Glorious Property IPO is planned for Sept 24.
Hedge funds and Western banks invested in Chinese property companies two years ago after a real estate boom sent valuations in the sector soaring and produced some successful IPOs.
Such pre-IPO investments were expected to be profitable to investors who thought the credit bubble would last and planned for a quick and easy pay-out after the listing.
But the credit bubble burst, and the ensuing financial crisis quashed those hopes, leaving investors with illiquid holdings worth much less than hoped.
Now, with China lifting a ban on IPOs and the Hong Kong IPO market heating up, companies are rushing to list while the window is open.
Chinese property prices in 70 cities rose 2 per cent in August from a year earlier, compared with a 1 per cent annual rise in July. -- Reuters
Source: Business Times, 15 Sep 2009