Universal Medical Financial & Technical Advisory Services, a Chinese healthcare leasing business and service provider, defied volatile stock markets on Tuesday to price its Hong Kong initial public offering towards the middle of its range.
Allocations were still being finalised after the market close as investors braced for possible news that Greece had defaulted on a €1.6 billion ($1.79 billion) loan to the International Monetary Fund, adding to the jumpiness that has already befallen Chinese shares in recent sessions.
Although both indexes traded higher on Tuesday, the Shanghai Stock Exchange Composite Index has shed 6.5% while the Hang Seng is down 3% since UMS launched its roadshow on June 21. In addition to worries about a potential Greek default and messy exit from the eurozone, investors have been spooked by regulator moves in China to cap margin financing of share purchases.
In spite of that, UMS was able to price some 423.2 million shares at HK$8.18 per unit, allowing the issuer to raise $446.7 million from the deal. If the overallotment option is exercised, the deal size will be boosted to $513.7 million.
That equates to 15.4 times its 2015 earnings and 1.87 times its price-to-book pre-shoe, or 15.9 times its 2015 earnings and 1.82 times its price-to-book post-shoe, according to a source close to the deal.
The deal was a hit with retail investors, with the Hong Kong public offering oversubscribed by 53 times, triggering a 40% retail clawback, the source close to the deal told FinanceAsia. The institutional tranche was oversubscribed three times.
Institutional investors placed orders across the price range but in an effort to reflect challenging market conditions, UMS “prudently priced at HK$8.18 per share versus something higher,” the source said. He noted that UMS still came at a high premium to a direct comparable, Far East Horzion, but argued that UMS’s premium was justified as it has a different business model, higher margins, and more sector upside.
The majority of the investors came from Hong Kong and China but there were a handful of large institutional investors from the UK, Europe and US. In the institutional tranche, the top-20 investors took up approximately half of the deal. That excludes the cornerstone tranche.
The deal was initially marketed at a price range of between HK$7.68 and HK$10 per unit. The shares, all primary, represent 25% of the total issued share capital. The greenshoe adds an additional 15%.
UMS managed to secure $200 million from cornerstone investors, including E Fund, Shenwan Hongyuan, Hainan Airlines’ subsidiary Beijing Chiang, Nikko Asset Management, and Beijing Infrastructure. There is a six month lockup for existing shareholders, which include Citic Capital, ICBCI and Chow Tai Fook, as well as the cornerstones.
Nomura and Goldman Sachs were the joint leads on the deal.
UMS, which provides integrated services including leasing, advisory and procurement services, became the second-largest healthcare leasing business in China in 2014 with an 8% market share, according to the company’s prospectus citing Frost & Sullivan research.
Golden Throat
Elsewhere in the Hong Kong market, Golden Throat Holdings, the lozenges manufacturer, set a price range for its own flotation.
Some 181.6 million primary shares will be on offer at between HK$4.58 and HK$6.28 per share, representing 25% of the enlarged share capital. An exercised greenshoe option will tack on an additional 27.2 million shares to the base deal, according to a term sheet seen by FinanceAsia.
The throat lozenges manufacturer is seeking to raise up to $147 million pre-shoe, and $169 million post-shoe.
Depending on where the shares price, Golden Throat will have a market capitalisation of between $429 million and $589 million pre-shoe, and $445 million to $611 million post-shoe.
Credit Suisse is the sole bookrunner on the deal.
Four cornerstone investors — Super Silverwood, Guangzhou Ruitian, Town Health and China New Rich Medicine — have pledged a combined total of $40 million in the throat lozenges company.
The roadshow will last from June 30 to July 6, with pricing scheduled for July 6.
