Poly (Hong Kong) Investment, the Hong Kong-listed arm of the China Poly Group Corporation, has raised HK$3.52 billion ($457 million) through a top-up placement. The property developer said it will use the money for future investment opportunities including increasing its landbank.
The offering received strong investor interest; the book was covered one hour after opening on Wednesday morning and an upsize option was fully exercised. Investors were apparently not concerned about Beijing’s current efforts to clamp down on the country’s property market because the China Poly Group is a large-scale state-owned enterprise and it has already achieved its profit target, bankers involved with the deal said.
The base deal size of the placement was 350 million shares, which were offered at a price between HK$8.68 and HK$9.05 per share. The price range translated into a discount of between 4% and 8% versus Tuesday’s closing price of HK$9.43.
The deal came with an upsize option of an additional 50 million shares which have been fully injected into the offering. The final price was fixed at HK$8.8, representing a 6.7% discount to the previous closing price.
The book was multi-times covered by a group of high-quality investors, a banker said.
It was the company’s second equity fundraising in less than a year. Last October, Poly (Hong Kong) raised $397 million via a placement to fund a land acquisition from its parent company. It sold 380 million shares, upsized from 320 million, at HK$8.10 apiece -- the top of a price range starting from HK$7.8.
Poly (Hong Kong) recorded an overwhelming 39 times profit growth (year-on-year) in the first half of 2010, during which net earnings jumped to around HK$736 million from HK$18 million, according to the company’s interim report. Sales soared more than 10 fold year-on-year to HK$2.43 billion from HK$218 million, thanks to a home-buying frenzy in China.
Dramatically climbing house prices have urged the Chinese government to clamp down on property developers and market speculation. Beijing announced in April a series of tightening measures including that it would penalise or confiscate land from developers found to be hoarding land.
However, Poly (Hong Kong) is confident. “Although the government implemented a series of austerity measures, the group’s projects maintained relatively strong competitiveness,” the company said in a statement. About 75% of Poly (Hong Kong)’s revenue comes from its projects in central and western China and the Yangtze River Delta, where household incomes have grown fast in recent years.
Shares in Poly (Hong Kong) were suspended from trading on Wednesday. The stock started trading again yesterday and closed 6.15% lower at HK$8.85.
So far this year (as of Tuesday’s close), the company’s share price has fallen 2% from HK$9.63 to HK$9.43. The stock is trading at an average price of HK$8.03 with a daily trading volume of 11.39 million shares in the three months before the placement took place, according to data from Bloomberg.
BOCI, Citigroup and Standard Chartered Bank managed the sale.
