Evergrande, Wing Fat ax IPOs
Updated: 2008-03-21 07:10
By Hui Ching-hoo(HK Edition)
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Two IPO candidates -Evergrande Real Estate Group and Wing Fat Printing - have decided to scrap their listing plans in view of the bleak market sentiment.
Analysts predicted that newcomers would shy away from tapping the initial public offering (IPO) market in the months ahead.
Guangzhou-based developer Evergrande had hoped to raise as much as HK$16.8 billion through the IPO, but its shares received lukewarm attention. They weren't even half covered, despite the firm extending the subscription period from four to five days.
So, the company's management and underwriters decided yesterday to shelve the IPO offer, sources said.
Meanwhile, another IPO candidate, Wing Fat Printing - a spin-off of conglomerate Shanghai Industrial Holdings - also withdrew its IPO plan after its retail tranch received insufficient orders.
Wing Fat had planned to sell 150 million new shares to raise up to HK$690 million.
Karl Thomson Securities Chief Portfolio Strategist Patrick Shum said that the plunging of China Railway Construction shares below their offering price on Tuesday was a severe blow to investors, and it drastically diminishes their confidence in the IPO market.
"The IPO craze is over," said Shum.
Shum expects the IPO market to remain inactive over the coming months. "Unless the Hang Seng Index finds support, or if the market is stimulated by external factors such as the Beijing Olympics, we don't see any sign of it turning around in the short run."
Prudential Brokerage Associate Director Kingston Lin echoed Shum's view: "Investors have become more cautious to IPO newcomers on the back of the worse-than-expected performance of China Railway Construction."
However, he didn't think the pricing of the two new candidates was too aggressive.
"The offering price of Evergrande had a substantial 60 percent discount to its NAV (net asset value), but investors were scared away by the central government's cooling measures in the property market."
But Ronald Wan, managing director and head of investment banking of BoCom International, said that IPO candidates need to lower their prices to lure investors.
"The tepid responses to the two IPOs are attributed to the mispricing strategies. However, they are unlikely to lower the offering prices in consideration of their financial needs."
(HK Edition 03/21/2008 page2)