China Zhongwang Holdings (1333.HK) priced its initial public offering at the lower end of an indicated range, according to a term sheet obtained by Reuters on Thursday, raising $1.3 billion in the world's biggest IPO so far this year.
The public offering of Asia's largest maker of aluminium 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 $1 billion the company initially planned to raise.
The HK$7 per share IPO price values Zhongwang at around 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, 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-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 authorised 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 on Thursday.
China Zhongwang sold 1.4 billion shares, or nearly 26 percent of its enlarged share capital, making it the world's largest IPO since China South Locomotive (1766.HK) (601766.SS) raised $1.57 billion last August.
HEAVY METAL
Liaoning-based Zhongwang makes two main types of products. Its industrial aluminium is used as parts and components for railway cargo, metro rails, trucks and autos. Its construction aluminium is used in the fabrication of door frames and window frames and interiors in upscale buildings.
In the IPO prospectus, Zhongwang said 2008 revenues nearly doubled to 11.3 billion yuan ($1.65 billion) mainly from the demand and higher margins of its industrial aluminium. The company's projects include a Beijing airport terminal and Beijing Olympic games venues.
Company officials and the firm's bankers marketed the deal in Asia before heading to Europe and the United States for meetings with institutional investors there.
Zhongwang has said it would use the proceeds to expand capacity and buy equipment, as well as for working capital, debt repayment and research and development.
The world's biggest listing this year was the $828 million February IPO by Mead Johnson Nutrition Co (MJN.N). Global IPO proceeds so far in 2009 plunged to $3.2 billion, compared with $51.5 billion in the year-ago period, according to Thomson Reuters data.
Zhongwang shares will trade under the 1333 (1333.HK) Hong Kong stock code and debut on May 8.
Macquarie (MQG.AX), CITIC Securities, JPMorgan (JPM.N) and UBS (UBSN.VX)(UBS.N) were the joint lead managers of the deal. CITIC Securities, JPMorgan (JPM.N) and UBS (UBSN.VX)(UBS.N) were the bookrunners
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