Within a day of grey market trading, brokers were reporting trades at HK$3.80 for the 240 million share deal, which priced on Saturday at HK$2.25 per share.
With CLSA as lead manager, the deal came at the very top of its HK$1.69 to HK$2.25 indicative range and on a p/e ratio of 12 times 2001 earnings and 15% discount to DCF. Because of massive oversubscription on the retail tranche, full clawbacks were instituted taking the retail IPO up from 10% to 50% of the offering and the institutional placement down to 47%, after a preferential share offer to KMB shareholders was accounted for.
Observers consequently report heavy placement in Asia, where 76% of stock was allocated, with Europe taking 18.5% and the US 5.5%. By investor type, tier 1 investors were said to account for 45%, with tier 2 on 18% and tier 3 on 17%.
Two key factors underpinning demand are said to have been a clear primary market for Hong Kong equity and the management's ability to convince investors of what is a relatively unproven business model. Roadshow broadcasts advertising via LCD (liquid crystal display) screens on about 2000 KMB buses, while its parent retains responsibility for advertising on the outside of buses and at bus stops.
In Hong Kong, the company has attracted some criticism from the English-speaking press which object to the fact that passengers have no choice but listen to what is said to be very loud Cantonese advertising. KMB, on the other hand, intends to install screens on all its 5000 buses and is also talking about establishing a joint venture on the Mainland to expand its fleet further.
In terms of profitability, Roadshow is also projecting annual increases of about 30% for the first few years of operation. As of FY00, the company recorded net income of HK$180 million.
Total proceeds from the IPO amounted to HK$540 million ($69.4 million) and there is also a 15% greenshoe.
