China Communications Construction Company is a case in point. According to a source, ChinaÆs largest designer and builder of ports attracted more than 1,000 orders and about $160 billion worth of demand from institutional investors, making it more sought after than both Bank of China and China Merchants Bank.
This allowed the company to price the IPO at the top of the HK$3.40 to HK$4.60 range for a total deal size of HK$16.1 billion ($2.07 billion). The deal was being arranged by BOC International, Merrill Lynch and UBS.
After deducting the portion allocated to retail and corporate investors, the remaining $1.58 billion institutional tranche was more than 100 times covered.
The initial 5% retail offering was 220 times subscribed, which triggered a clawback that increased this portion of the deal to 20%. In addition, the company sold a combined $80 million worth of shares, or about 3.9% of the total offering, to Chow Tai Fook, the private investment vehicle of New World Development chairman Cheng Yu-tung, the Government of Singapore Investment Corp (GIC) and to China Life Insurance.
Shanghai Jin Jiang International Hotels (Group) also raised the maximum HK$2.42 billion ($311 million) it targeted after fixing the price of its IPO at the top of the HK$1.81 to HK$2.20 range. BNP Paribas and UBS were joint arrangers of that offering.
The pricing of both stocks came after China Communications Services, a provider of engineering and technical services to the Mainland telecom industry, soared 85.5% to HK$4.08 on its first day of trading on Friday as investors scrambled to get a piece of a company that is expected to be one of the winners once China allocates its 3G licenses. Last week was hot with rumours that this could happen before the end of the year.
Gold miner Zhaojin Mining Industry, which also debuted Friday, rose 26% above its IPO price, closing at HK$12.68.
Jin Jiang, which runs budget inns as well as landmark hotels including The Peace Hotel in Shanghai, saw its 10% retail tranche more than 380 times subscribed. Like for CCCC, this triggered a full clawback, although the lack of waivers meant its retail tranche was increased to 50% of the deal. A commitment to sell $70 million to three corporate investors, including the Starwood group which operates a number of international hotel chains such as the Sheraton, St Regis and Westin, reduced the institutional tranche even further to $85.5 million, or 27% of the deal. According to sources this final size ended up at least 100 times covered.
Aside from the $30 million bought by Starwood, BOC Investment Group and Bank of East Asia chairman David Li bought $20 million worth of stock each.
Observers note that both CCCC and Jin Jiang are unique offerings in the sense that they are the first within their particular industry to list in Hong Kong, which likely contributed to the overwhelming demand.
CCCC ôis the only stock like this that gives direct exposure to Chinese infrastructure, especially port construction. Everyone wants it,ö says one source.
Aside from its existing ports, roads and bridges business, the company also has plans to move into railway construction, which is adding to the attraction, others say.
Meanwhile, Jin Jiang is expected to benefit from the 2008 Olympics in Beijing and the 2010 World Expo in Shanghai and increasing demand for budget hotels. It also got an additional boost from the listing of smaller budget hotel operator Home Inns & Hotels Management on Nasdaq. That stock has had a spectacular run since its October 26 trading debut and as of Friday it was quoted at $34.00, 146% above its $13.80 IPO price.
Jin Jiang offered 1.1 billion new shares, or 25% of its existing share capital. The final price values it at 29.5 times its 2006 earnings.
CCCC sold 3.5 billion new H-shares, or 24.5% of the company at a 2007 PE multiple of about 18 times based on consensus estimates. This puts it at the upper end of the 15 to 18 times forward earnings where construction contractors like SwedenÆs Skanska, GermanyÆs Hochtif and Bilfinger Berger and Balfour Beatty of the UK tend to trade. However, given CCCCÆs more diverse business, including the design element, these arenÆt direct comparables, analysts say.
On Friday, Neo-Neon Holdings, a manufacturer of decorative lightning, also priced its Hong Kong IPO at the top of the range at HK$6.90, raising HK$1.38 billion ($177 million).Hong Kong listing candidates continue to price their offerings at the top of the range as the demand for new paper shows no signs of slowing down even with just two weeks left to the Christmas holidays.
China Communications Construction Co. was a case in point. According to a source, ChinaÆs largest designer and builder of ports attracted more than 1,000 orders and about $160 billion worth of demand from institutional investors, making it more sought after than both Bank of China and China Merchants Bank.
This allowed the company to price the IPO at the top of the HK$3.40 and HK$4.60 range for a total deal size of HK$16.1 billion ($2.07 billion). The deal was being arranged by BOC International, Merrill Lynch and UBS.
After deducting the portion allocated to retail and corporate investors, the remaining $1.58 billion institutional tranche was more than 100 times covered.
The initial 5% retail offering was 220 times subscribed, which triggered a clawback that increased this portion of the deal to 20%. In addition, the company sold a combined $80 million worth of shares, or about 3.9% of the total offering, to Chow Tai Fook, the private investment vehicle of New World Development Chairman Cheng Yu-tung, The Government of Singapore Investment Corp. (GIC) and to China Life Insurance.
Shanghai Jin Jiang International Hotels (Group) also raised the maximum HK$2.42 billion ($311 million) it targeted after fixing the price at the top of the HK$1.81 to HK$2.20 range. BNP Paribas and UBS were joint arrangers of that offering.
The pricing of both stocks came after China Communications Services, a provider of engineering and technical services to the Mainland telecom industry, soared 85.5% to HK$4.08 on its first day of trading Friday as investors scrambled to get a piece of a company that is expected to be one of the winners once China allocates its 3G licenses. Last week was hot with rumours that this could happen before the end of the year.
Gold miner Zhaojin Mining Industry, which also debuted Friday, rose 26% above its IPO price, closing at HK$12.68.
Jin Jiang, which runs budget inns as well as landmark hotels including The Peace Hotel in Shanghai, saw its 10% retail tranche more than 380 times subscribed. Like for CCCC this triggered a full clawback, although the lack of waivers meant its retail tranche was increased to 50% of the deal. A commitment to sell $70 million to three corporate investors, including the Starwood group which operates a number of international hotel chains such as the Sheraton, St. Regis and Westin, reduced the institutional tranche even further to $85.5 million, or 27% of the deal. According to sources this final size ended up at least 100 times covered.
Aside from the $30 million bought by Starwood, BOC Investment Group and Bank of East Asia Chairman David Li bought $20 million worth of stock to each.
Observers note that both CCCC and Jin Jiang are unique offerings in the sense that they are the first within their particular industry to list in Hong Kong, which likely contributed to the overwhelming demand.
CCCC ôis the only stock like this that gives direct exposure to Chinese infrastructure, especially port construction. Everyone wants it,ö says one source.
Aside from its existing ports, roads and bridges business, the company also has plans to move into railway construction, which is adding to the attraction, others say.
Meanwhile, Jin Jiang is expected to benefit from the 2008 Olympics in Beijing and the 2010 World Expo in Shanghai and increasing demand for budget hotels. It also got an additional boost from the listing of smaller budget hotel operator Home Inns & Hotels Management on Nasdaq. That stock has had a spectacular run since its October 26 trading debut and as of Friday it was quoted at $34.00, 146% above its $13.80 IPO price.
Jin Jiang offered 1.1 billion new shares, or 25% of its existing share capital. The final price values it at 29.5 times its 2006 earnings.
CCCC sold 3.5 billion new H shares, or 24.5% of the company at a 2007 PE multiple of about 18 times based on consensus estimates. This puts it at the upper end of the 15 to 18 times forward earnings where construction contractors like SwedenÆs Skanska, GermanyÆs Hochtif and Bilfinger Berger and Balfour Beatty of the UK tend to trade. However, given CCCCÆs more diverse business, including the design element, these arenÆt direct comparables, analysts say.
On Friday, Neo-Neon Holdings, a manufacturer of decorative lightning, also priced its Hong Kong IPO at the top of the range at HK$6.90, raising HK$1.38 billion ($177 million).
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