With just three more weeks until the Christmas break, share issuers targeting billions of dollars continue to come to the Hong Kong market to compete for the attention of investors who have started to show wariness of new transactions.
One of the big issuers is Changsha Zoomlion Heavy Industry Science and Technology, which is looking to raise between HK$12.1 billion and HK$16.5 billion ($1.57 billion to $2.1 billion) from an initial public offering.
The targeted size suggests Zoomlion, which is already listed in Shenzhen, has the chance to overtake shipbuilder China Rongsheng Heavy Industries as the third largest IPO in Hong Kong this year. Rongsheng raised $1.8 billion after pricing its offering in the lower half of the indicated range last month.
If successful, Zoomlion’s listing will help cement Hong Kong’s position as the world’s hottest IPO market in 2010. There was a total of $51 billion raised through IPOs in the first 11 months this year, representing an increase of 113% from $24 billion in the same period last year, Hong Kong Exchanges and Clearing said in an announcement on its website yesterday. A total of 92 new companies listed in these 11 months, it said.
Based in the city of Changsha in the middle of China, Zoomlion is a leading manufacturer of construction machinery, including concrete machinery, crane machinery and environmental and sanitation machinery.
China and other developing countries represent the fastest growing market for construction machinery. In 2009, China accounted for approximately 42.6% of global sales and became the largest market for construction machinery, followed by North America and Europe, Zoomlion said in its preliminary IPO prospectus.
The company is offering 869.58 million shares, all primary, of which around 95%, or 826.1 million shares, will be offered to institutional investors. The remaining 5%, or 43.49 million shares, are earmarked for the Hong Kong public offering.
They are offered at a price ranging from HK$13.98 to HK$18.98 apiece, which represents a price-to-earnings (P/E) ratio of 11.5 times to 15.6 times, based on the company’s forecast earnings for 2011. By comparison, Lonking Holdings, a Hong Kong-listed wheel loader producer, is currently trading at 13.6 times, according to Bloomberg data.
Zoomlion's Shenzhen-listed shares have been quoted at an average of Rmb13 in the past three months, which equals a 2011 P/E of 15.7 times.
The deal comes with a 15% greenshoe option which, if fully exercised, would allow the company to raise up to $2.4 billion by issuing an additional 130 million primary shares.
Zoomlion kicked off the institutional bookbuilding yesterday and has received an aggregate $82 million of demand from four cornerstone investors. Hillhouse Capital Management, an Asia-focused fund management firm with $4 billion of capital under management, has agreed to purchase $20 million worth of shares in the deal.
Keywise Capital Management, a Hong Kong-based fund management firm, will invest $20 million; SIIC Investment Company, the investment arm of government-backed Shanghai Industrial Investment, will buy $10 million worth shares; and Zhong Ke Bright Trinity Enterprises, an investment firm, will invest $32 million.
The IPO price will be fixed on December 17 and the trading debut is scheduled for December 23. China International Capital Corp, Goldman Sachs, J.P. Morgan and Morgan Stanley are joint bookrunners.
Zoomlion has been listed on the Shenzhen stock exchange since October 2000. It made Rmb2.4 billion ($355 million) of net earnings in 2009 and Rmb2.16 billion in the first six months this year.
