China Maple Leaf Educational Systems has become the first school operator to float its shares in Hong Kong after retail investors flocked in their droves to its initial public offering.
The company, which is based in the north-eastern Chinese port city of Dalian and is the largest private school operator on the mainland, sold 334 million primary shares at HK$2.88 per unit.
The initial price range was HK$2.23 to HK$3.07 per unit and there was "no question the issuer could have priced at the top of the range," one banker close to the deal told FinanceAsia. "It was multiple times covered and there was very little price sensitivity in the book. But Maple Leaf generously decided to go with the more investor-friendly price at HK$2.88."
The retail tranche was oversubscribed 195 times, enabling the issuer to tack on an additional 51 million shares by exercising a greenshoe option, bringing the total deal size to $123 million as retail investors warmed to the story behind Maple Leaf.
The company has more than 12,900 students enrolled in 37 different schools across eight cities in China. Its schools are also affiliated to the educational system of British Columbia, Canada.
Also oversubscribed several times was the IPO's institutional tranche, helped by solid interest from long-only fund managers.
Helping matters were three cornerstone investors secured during the bookbuild; International Finance Corporation, Edmond de Rothschild and New China Life pledged a combined $28.2 million. Each received 25.5 million shares.
More than 50% of the deal, which was jointly lead-managed by CLSA and BNP Paribas, went to retail investors. Of the remainder that went to institutional investors, some 70% was allocated to long-only institutional investors, including the cornerstone investors. There were more than 100 lines in the book and the top-10 holders made up more than half of the deal, the banker familiar with the deal said.
At HK$2.88 per share, shares in Maple Leaf were sold at 20.1 times its forecast 2015 earnings.
Affordable
Founded by Canadian Chinese textile businessman Sherman Jen Shuliang in 1996, Maple Leaf's portfolio includes seven high schools, seven middle schools, six elementary schools, 11 pre-schools and two foreign national schools.
The schools provide bilingual, dual-curriculum and dual-diploma high school education. Graduates receive an accredited British Columbia high school diploma as well as a Chinese high school diploma. Over half of the graduates attend the top 100 universities in the world.
In addition to the strong curriculum, the banker noted that what makes Maple Leaf stand out is its affordability.
"The fees are much cheaper than other private schools in China. This is a play not on the super wealthy. It's a play on the moderately wealthy people who want their kids to have bilingual education associated with British Columbia in Canada," the banker said. "When you come out of this school, you qualify for both Chinese and British Columbia qualifications, which [makes it easier] to get into the top international universities."
On average, high school tuition fees ranged from Rmb42,400 to Rmb71,500 ($6,919 to $11,668) per student for the 2013/2014 school year, lower than the average tuition for international high schools in China, the banker said.
Hong Kong-based Nord Anglia Education, which operates private schools for K-12, listed on the New York Stock Exchange earlier this year, raising $304 million in the process.
