Hong Kong-listed Clear Media completed a debut HK$312 million ($40 million) convertible yesterday (September 20) with JPMorgan as lead manager.
The transaction marks the group's first foray back into the equity markets since it listed at the very end of 2001 in an IPO led by Goldman Sachs. The new deal has a five-year maturity with an issue price of par, zero coupon and redemption price of 121.899% to yield 4%. There is a three-year put at 112.616% and a three-year call with a 130% hurdle.
The conversion premium was fixed at 35% over the stock's HK$7.10 close. When it listed in 2001, Clear Media was priced at HK$5.90, but the sector rapidly fell from grace and has only recently recovered its standing as investors re-focus on China and seek out fast-growing mid-cap plays.
Year-to-date the stock is up nearly 60% and is currently trading on a 2004 P/E ratio of 34 times earnings.
Underlying assumptions for the CB comprise a bond floor of 96%, implied volatility of 27% and theoretical value of 101%. This is based on a credit spread of 250bp over Libor, 5% borrow cost, zero dividend yield and 100-day volatility of 29%.
The order book was targeted at a small number of investors, with just under 10 accounts participating, of which nearly all came from Europe. Specialists say the majority were looking to build up a meaningful position in a stock, which only trades about $250,000 a day.
Clear Media is planning to use proceeds to expand its portfolio on the mainland. The group's share price recovery has recently been fuelled by expectations of rising advertising revenues in the run-up to the Beijing Olypics. Clear Media has more than 17,000 advertising hoardings on dedicated bus shelters in major Chinese cities, which it typically owns on a 10-year lease.
The company has long held a monopoly over Shanghai and Guangzhou. In August it acquired a portfolio of bus shelters in Beijing, which should push up its market share to about 86%.
Specialists say the best listed comparable is probably tom.com, which is currently trading at 36 times 2004 earnings.