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October 17, 2009

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Excellence seeks US$1b IPO

CHINESE mainland developer Excellence Real Estate Group Ltd plans to raise up to US$1 billion from a Hong Kong initial public offering, according to a term sheet obtained by Reuters yesterday, as it joins the ranks of property firms queueing to cash in on the country's property boom.

The Shenzhen-based property developer, which focuses on commercial properties and mid-to-high-class residential projects, is selling 3 billion shares, or 25 percent of its enlarged share capital, at an indicative range of HK$2.10 (US cents) to HK$2.60 per share, the term sheet said.

However, some investors have cast a wary eye on property listings in the Hong Kong aftermarket, given the half-dozen or more that are expected to hit the market.

Glorious Property fell 20 percent on its debut this month, while China South City's opening day fared worse, dropping 23 percent.

"Chinese mainland property IPOs are not very attractive to investors, as there are plenty of choices in the market and their valuations are not expensive now," said Y.K. Chan, strategist at Phillip Capital Management (HK) Ltd.

But investment bankers in the region also say that if a company can prove it's different from the others, public or private, then investors will seize the offering.

A formal marketing roadshow for Excellence started yesterday, and the retail portion of its Hong Kong offering will be held from next Wednesday to October 27, according to a term sheet.

Final pricing is set for October 27, with a trading debut scheduled for November 3, the sheet said.

"It is an appropriate time for the firm to list now, as it is seeking more funds for acquiring additional land use rights and further expansion," a company spokeswoman said.

According to analysts at the banks handling the IPO, Excellence's offering price represents a multiple of about 8 to 10 times forecast 2010 earnings.

By comparison, SOHO China trades at 6.4 times forecast 2010 earnings, while KWG Property trades at 12 times forecast 2010 earnings.


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