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Phoenix Publishing & Media, a leading publishing group in China, raised Rmb4.47 billion ($705 million) from its Shanghai initial public offering yesterday, after fixing prices at the top end of an indicated range.
The deal proved popular with both institutional and retail investors and will likely bring a glimmer of hope to the weak A-share market, which has lost 15% so far this year. The company sold 509 million shares, all primary, at Rmb8.8 each, at the high end of the suggested price range.
The final price values the company at 63 times its 2010 earnings, which is a steep premium compared to the industry average of 33.9, and 14.5 for all Shanghai-listed companies.
Even at that rich price, a total of 174 institutional investors took part in the deal, placing orders for 3.22 billion shares. The final order book comprised 110 investors, who put in 2.29 billion orders at Rmb8.8 — exactly 10 times the 229 million shares on offer to them.
The company placed 55% of the offering, or 279.9 million shares, to retail investors, who covered the book 115 times at the final price, according to a statement to the stock exchange.
The good response suggests that there is still demand for new equities in China, fuelled by the lack of other options for wealth preservation. Deposit rates have lagged behind inflation for 20 months in China, with the benchmark one-year savings rate currently standing at 3.5%, while the October consumer price index was 5.5%. Housing prices have started to fall in some cities but are still beyond the reach of most workers.
Phoenix Publishing was offering the shares at between Rmb8 and Rmb8.8 each. CICC, the deal’s sole bookrunner, said that Rmb7.8 to Rmb10.5 was a reasonable price range, according to a statement from the company.
Phoenix Publishing, based in east China’s Jiangsu province, had a net profit of Rmb660 million from Rmb5.4 billion in sales in 2010.
Chinese media reported in May that 10 news portals may be allowed to list publicly to help the new media industry grow. People’s Daily Online, the operator of the People’s Daily website, was reported to be planning to raise Rmb800 million in an IPO in Shanghai this year. It is said to have been in talks with potential investors, including China Mobile and China Telecom, and will offer 40 million A shares to fund its value-added services and online video networks.
Shanghai’s primary market has been dominated by small IPOs this year. After Sinovel Wind Group’s $1.4 billion A-share listing in January, the billion-dollar deals didn’t come until later in the year. The biggest so far is Sinohydro’s $2.1 billion listing, in which China’s top dam builder sold 3 billion shares at the bottom of the Rmb4.50 to Rmb4.80 price range.
More big deals are in the pipeline. Shaanxi Coal Industry, which plans to raise around $2.7 billion from a Shanghai IPO, has received approval to list from the China Securities Regulatory Commission, and China Communications Construction has also been given the nod for a $3 billion IPO in the city.
