Shirble Department Store, a Shenzhen-based department store operator, has raised HK$1.375 billion ($177 million) from its Hong Kong initial public offering after pricing the shares at the mid-point of the indicated range.
This is Shirble’s second try at a Hong Kong listing. It planned a $130 million IPO in June but called off the deal in early July due to volatile market conditions at the time.
Compared with the IPOs of one of Shirble’s domestic competitors and other Chinese retailers, which met with overwhelmingly strong demand supported by the recent hot consumption theme in the market, Shirble didn't stand out. However, the demand was decent enough.
The institutional tranche was nearly 10 times subscribed and the Hong Kong public offering was 26 times covered. The oversubscription rate in the latter tranche triggered a partial clawback which increased the retail tranche to 30% of the offering from 10% originally.
The institutional order book comprised many high-quality accounts, including both long-only funds and global hedge funds. About 70% of the institutional demand was generated out of Asia, with the remaining 30% coming from Europe, according to sources.
By comparison, Shirble's domestic competitor Springland International Holdings' $477 million IPO in October was more than16 times subscribed by international investors, and 80 times covered by retail investors. The deal saw a clawback that increased the size of the retail tranche from 10% to 40%.
Shirble sold 625 million shares, all primary, at HK$2.20 apiece. Based on the company's forecast earrings for 2011, the final price translated into a price-to-earnings (P/E) ratio of 18.6 times.
This pitched Shirble at a discount to Springland, which trades at a 2011 P/E ratio of 23 times. Other publicly traded Chinese department stores are trading at an average of 22.5 times next year's earnings.
Shirble offered the shares in an indicated price range between HK$1.85 and HK$2.55, which suggested a potential deal size of up to $205 million. The price range represented a 2011 P/E ratio of 15.6 times to 21.6 times.
The deal also comes with a 15% greenshoe option which, if fully exercised, will allow the company to raise up to $204 million.
Shirble has one cornerstone investor in the form of CCB International Asset Management, an indirect wholly owned subsidiary of China Construction Bank Corporation, which invested $20 million in the deal.
The trading debut is scheduled for November 17. BNP Paribas and BOC International are joint bookrunners.
Shirble plans to use the proceeds from the transaction to open eight additional stores in Guangdong and Hunan in the next three years. The company currently operates 11 mid- to low-end department stores in Shenzhen and in Hunan province.
Although founded as recently as 1996, Shirble is among the oldest stores in Shenzhen. The company's net earnings increased to $20.6 million in 2009 from $14.8 million in 2007, it said in an IPO filing with the Hong Kong stock exchange. Analysts predict a net profit of $27 million this year.
