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China Zhongwang goes low, but raises US$1.3b with IPO
By Michael Flaherty |
May 1, 2009, Friday
|
Print Edition
Print Edition
CHINA Zhongwang Holdings priced its initial public offering at the lower end of an indicated range, according to a term sheet obtained by Reuters yesterday, raising US$1.3 billion in the world's biggest IPO so far this year.
The public offering of Asia's largest maker of aluminum extrusion products was ambitious in its size, pricing and timing, given the 94-percent drop in global IPO proceeds so far this year and the ongoing financial and economic crisis.
The offering attracted fewer retail investors than expected, but the proceeds raised were more than the US$1 billion the company initially planned to raise.
The HK$7 (90 US cents) per share IPO price values Zhongwang at about 11 times forecast 2009 profits, a relatively high multiple in the current climate.
"There are a whole lot of good stocks trading at around 10 times their earnings, so it's quite likely Zhongwang will drop further after it lists," said Patrick Shum, the chief portfolio strategist with Karl Thomson Securities. "Ten times valuation would be a good time to buy this stock."
The pricing was near the low end of an indicated HK$6.80 to HK$8.80 range, as jittery retail investors were reluctant to buy shares and institutions were unwilling to buy at the high end, sources said. The sources were not authorized to speak publicly about the deal.
The IPO's Hong Kong retail tranche was undersubscribed as local individuals bought just 69 percent of the shares allocated to them, said another source with direct knowledge of the deal. Underwriters will increase the allotment of shares for institutional investors from the original 90 percent target.
"Retail investors are worried the market might fall sharply," said Kingston Lin, associate director at Prudential Brokerage Limited.
Despite concerns of a deadly flu outbreak spreading from Mexico, Asian markets are holding up, with the MSCI index of Asia-Pacific shares, excluding Japan, hitting a six-month peak yesterday.
China Zhongwang sold 1.4 billion shares, or nearly 26 percent of its enlarged share capital.
The public offering of Asia's largest maker of aluminum extrusion products was ambitious in its size, pricing and timing, given the 94-percent drop in global IPO proceeds so far this year and the ongoing financial and economic crisis.
The offering attracted fewer retail investors than expected, but the proceeds raised were more than the US$1 billion the company initially planned to raise.
The HK$7 (90 US cents) per share IPO price values Zhongwang at about 11 times forecast 2009 profits, a relatively high multiple in the current climate.
"There are a whole lot of good stocks trading at around 10 times their earnings, so it's quite likely Zhongwang will drop further after it lists," said Patrick Shum, the chief portfolio strategist with Karl Thomson Securities. "Ten times valuation would be a good time to buy this stock."
The pricing was near the low end of an indicated HK$6.80 to HK$8.80 range, as jittery retail investors were reluctant to buy shares and institutions were unwilling to buy at the high end, sources said. The sources were not authorized to speak publicly about the deal.
The IPO's Hong Kong retail tranche was undersubscribed as local individuals bought just 69 percent of the shares allocated to them, said another source with direct knowledge of the deal. Underwriters will increase the allotment of shares for institutional investors from the original 90 percent target.
"Retail investors are worried the market might fall sharply," said Kingston Lin, associate director at Prudential Brokerage Limited.
Despite concerns of a deadly flu outbreak spreading from Mexico, Asian markets are holding up, with the MSCI index of Asia-Pacific shares, excluding Japan, hitting a six-month peak yesterday.
China Zhongwang sold 1.4 billion shares, or nearly 26 percent of its enlarged share capital.
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