Kosmopolito Hotels International, a Hong Kong-based hotel operator that is being spun off from local conglomerate Far East Consortium International, raised HK$1.18 billion ($153 million) ahead of its listing in Hong Kong on Monday. It is the first initial public offering by a hotel company on the Hong Kong stock exchange for nearly four years after Shanghai Jin Jiang Hotel’s popular $311 million IPO in December 2006.
Jin Jiang's public offering was more than 380 times subscribed by retail investors, which triggered a full clawback, and the stock soared 95% on its first trading day. Unlike Kosmopolito, Jin Jiang has all its operations in mainland China, but the good market response still reflected an interest among Hong Kong investors for hotels. And that appears to remain the case, despite the fact that the cut-throat competition for attractive sites and buildings among the city's hotel developers and operators is growing, pushing up the already staggeringly high property prices.
Kosmopolito's institutional offering received decent demand from a well-mixed group of investors, mostly Asia-based, including long-only accounts, hedge funds and private banking firms. The offering was multiple times covered by more than 75 institutional investors, according to a source.
The company also secured one cornerstone investor in the form of Chow Tai Fook, the investment vehicle of Hong Kong tycoon Cheng Yu-tung, which bought HK$100 million worth of shares.
Investors are interested in the company's good Ebitda (earnings before interest, tax, depreciation and amortisation) margin of 38.6% and high occupancy rate of 90%, which are both above the industry average, the source said.
Whether that interest is strong enough to also support a good trading debut remains to be seen. Trony Solar, which completed a $223 million Hong Kong IPO last week, saw dramatic ups and downs on its first trading day yesterday. The stock opened 30% above its HK$4.50 IPO price at HK$5.85, but then fell sharply and closed at just HK$5.07 -- 12.6% higher than the IPO price.
