Monday, September 28, 2009

HK IPOs, Quek & Chua Bet On Wynn To Win

HK IPOs are very very hot. The few that listed in August and early September were fantastic performers. Our own Quek Leng Chan and Chua Ma Yu have latched onto the IPO of Wynn Macau (please read my posting on Wynn Macau ) . Last week saw Glorious Property pricing its IPO in the bottom half for a $1.28 billion deal, while CR Cement raises $825 million after pricing at the top.

But what got everybody a bit nervous was the very dismal performance by Metallurgical Corporation of China, which fell 11.65% below its IPO price on its debut last Thursday after completing the largest Hong Kong IPO year-to-date. MCC's A-shares gained 35% in their debut last Monday in Shanghai, but have since been on a declining trend. MCC's H-shares recovered marginally on Friday with a 1.25% gain to HK$5.68, but went into the weekend having lost 10.6% versus the IPO price of HK$6.35. The H-share is listed in HK and the A-share is in Shanghai. The funny thing is that on a dual listing, you can get the A-share going one way and the H-share going the other.

MCC's dismal performance should be noted because there are tons of big IPOs to follow, including the closely watched Wynn Macau. MCC's poor performance showed that a very high majority of investors are flipping the IPOs. Secondly, many HK tycoons are also big special subscribers to these IPOs and their sell orders can move the market. In MCC's case the grey market was already down 5% prior to the actual listing, an indication of big pre-selling by some big early investors who got the placement. Thirdly, it is after all, the biggest IPO this year, and it coincided with a consolidating global equity market following a torrid run up. Fourthly, these issues are too big to be "managed by approved syndicates", and in HK, investors are very very willing to "cut their losses" with any sign of suspicion that things are not headed in the right direction - quite different in mentality when compared to the average investor in Singapore and Malaysia, who are more incline to be a bit religious in the investing discipline ... "hope & pray".

Quek and Chua's foray to pick up Wynn Macau's placement, to me if I was advising them, is a big no-no. I would be happier to buy Genting Singapore in the open market up to S$1.10 than to subscribe to Wynn Macau. Wynn Macau's HK$12.6 billion offering was only 61.3 percent covered with subscription via margin financing hitting HK$773 million so far. Even before this news, I wasn't keen on Wynn Macau one single bit.

Actually with their contacts, the one IPO that I would highly recommend to buy and hold is Wilmar International's listing. Buy all you can even up to +10% of its IPO price.


FinanceAsia / StarBiz: Evergrande Real Estate - a Guangzhou-based home developer seeking to raise HK$11.7 billion - is set to go through a listing hearing tomorrow. More mainland developers plan to tap the Hong Kong market for more than HK$20 billion despite the poor performance of newly listed companies.

Mingfa Group, which is aiming for HK$8 billion, will also have its hearing tomorrow and Yuzhou Group, which is seeking up to HK$3.9 billion, may present its case later this week. Meanwhile, the directors of United Company Rusal - the world's largest aluminum producer - will decide this week whether to approve an IPO plan to float a 10 percent stake in Hong Kong, the Sunday Times reported. The Russian aluminum giant is expected to start bookbuilding in November and list in December. According to the British newspaper, Rusal is in talks with potential cornerstone investors including sovereign wealth funds China Investment Corp and Singapore's Temasek.

Wilmar International, the world's largest palm oil processor, plans to raise as much as HK$31.2 billion from listing 733 million shares of its mainland business. The firm is chaired by Kuok Khoon-hong - nephew of Robert Kuok Hock-nien, known as "sugar king of Asia."

Greens Group, a maker of waste heat recovery products had its listing hearing last Thursday. It plans to raise as much as HK$1 billion. Shenguan Holdings, a mainland sausage casing maker, starts bookbuilding today and will open its retail book on Wednesday, eyeing up to HK$1.17 billion. The firm plans to invest 240 million yuan (HK$272.38 million) this year and 469 million yuan in 2010 to expand production capacity. Its first-half net income surged 66.5 percent to 129 million yuan. Shenguan's clients include Yurun Group, an unit of China Yurun Food (1068).

Yingde Gases, Ausnutria Dairy Corp and China Vanadium Titano-Magnetite Mining, which will close their retail book tomorrow, had their retail tranche oversubscribed 3.5 times, twice and 5.6 times respectively, according to margin financing orders at nine brokers as of Friday.

Tycoons Tan Sri Quek Leng Chan and Tan Sri Chua Ma Yu have agreed to take part in the initial public offering (IPO) of Wynn Macau Ltd on the Hong Kong Stock Exchange by investing US$80mil and US$70mil respectively. Quek’s investment is via Guoco Management Co Ltd and GuoLine Group Management Co Ltd, which are indirect subsidiaries of Hong Leong Co (M) Bhd, while Chua’s vehicle is CMY Capital Markets Sdn Bhd. It is learnt that these Malaysian parties are going in independently. Chua is an investor and the attraction in Wynn is purely seen as a China play. But Wynn Macau's HK$12.6 billion offering was only 61.3 percent covered with subscription via margin financing hitting HK$773 million.

Powerlong Real Estate also got a lukewarm. response Both will close their retail book on Wednesday.

p/s photo: Maki Goto

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