Qingdao Port International raised US$376.6 million ahead of its Hong Kong initial public offering on Friday, adding some relief to the market following the pulled listing of pork producer WH Group.
The state-owned port operator sold 776.4 million new shares at a fixed price of HK$3.76 under the lead of BOC International, Citic Securities International and UBS. This represents 16.5% of the enlarged share capital, valuing the company at US$2.28 billion. There were also 70.58 million secondary shares on offer.
It is the second successful IPO since pork producer WH Group scrapped its highly anticipated offering one month ago after the issuer refused to lower its initial price range.
Interest in Hong Kong IPOs – particularly among the retail community – soured after the decision, although China CNR Corp managed to successfully list in May by pricing some 1.82 billion shares at HK$5.17 a share.
This, however, was towards the bottom of the initial HK$5 to HK$6.20 per share range. The institutional book was roughly three times oversubscribed but the retail tranche was only 80% subscribed.
Qingdao Port International may therefore help boost sentiment in the market.
Despite the port sector not being particularly popular – aftermarket performance has generally been poor for such companies post-listing – demand for Qingdao was reasonably robust, a banker close to the deal told FinanceAsia, noting that the deal was covered on the first day of the bookbuild.
“There was a good window and lots of investors participated,” the banker said. Investors included long-only institutional investors, QDII funds, strategic corporates and hedge funds.
Qingdao Port was also able to secure six cornerstone investors: marine transportation company Shanghai Zhenhua Port Machinery, No. 2 Engineering Company, China International Marine Containers, truck manufacturer Sinotruk International Investment, marine logistics and development firm DP World Asia, and Ming Cheng Company, one of China’s largest port operators. The cornerstones pledged a combined total of $167.7 million before the roadshow kicked off earlier this week, and they are subject to a six-month lockup.
Capacity
Most of the proceeds garnered from the flotation will go towards a planned capacity expansion at the Dongjiakou Port Area, which upon completion will have 112 berths and a forecasted annual capacity of 300 tonnes of cargo.
Qingdao Port offers a wide range of cargos, including metal ores, coal, petroleum, grains, steel, cars and other liquid and dry bulk.
Qingdao Port’s shares were priced at discount compared to its peers. Qinhuangdao Port, a coal-focused port operator, priced its shares at HK$5.25 each in a US$562 million Hong Kong listing last December, while Dalian Port priced its shares at Rmb3.80 (HK$4.72) in its flotation in November 2010.
Port operators have generally not performed well after listing, which some thought would be a deterrent for investors in Qingdao. Qinhuangdao Port is down 21% since its listing and down 12% year-to-date. Dalian Port, meanwhile, has dropped 48% since it floated, and is in the red by 7% so far this year to May 30.
