Credit Suisse completes two Hong Kong block trades in one day

Hopson sees third share sale in seven weeks as Temasek cashes out, while China Power International raises fresh capital on the back of a share-price rally.
Credit Suisse had a busy day yesterday completing placements for two separate Hong Kong-listed companies, one of which marked the third block trade involving shares of Hopson Development in seven weeks.

This time it was Singapore investment company Temasek which wanted to sell all its remaining shares in the developer and it managed to do so via an extremely quick trade during Hong KongÆs two-hour lunch break. The sale was priced at the bottom of the indicated range, which wasnÆt surprising given the limited execution time, and raised a total of HK$1.32 billion ($169 million).

The other deal was a top-up placement for China Power International which took the opportunity to raise fresh capital following a strong run in its share price. This deal totaled $1.74 billion ($223 million) after robust demand allowed the initial offer of 392 million shares to be increased to 470 million shares. The price was fixed at the top end of the tight HK$3.65 to HK$3.70 range for a 3.9% discount to WednesdayÆs close of HK$3.85.

China Power was the first of the two deals to launch. The order book was opened at about 10am Hong Kong time after the stock had been suspended from trading and stayed open until 12.30pm. Despite the timing, which limited the number of non-Asian participants to less than a handful, the offer attracted more than 50 investors and the increased deal size was over five times covered, according to sources familiar with the deal.

Investors are keen on the company which is in the process of expanding its power generation capacity quite aggressively both through outright acquisitions and via injections of more assets from its parent. However, it has been difficult for them to buy stock in the market given that China Power has a market cap of only $1.5 billion and a freefloat of 36%.

YesterdayÆs transaction accounted for 13% of the enlarged share capital and 57 days trading volume based on the daily average in the past three months.

The proceeds from the sale will go towards expansion, development and acquisition of power plants, with some of it likely to be used towards the purchase of a 25% stake in Shanghai Electric Power from its parent company that was announced last week. China Power said it would pay about $212 million for the stake, which will boost its current attributable generating capacity by about a quarter to 5,300MW.

Sentiment for the sector as a whole has also been extremely positive in the past three months on the back of a decline in coal prices and expectations that the Chinese government will raise power prices. China Power has seen its share price jump 60% since the beginning of August to MondayÆs record close of HK$4.09. On Tuesday and Wednesday it fell a combined 5.9%, however, after a local paper reported that the company was looking to sell new shares through a bank other than Credit Suisse.

One source says these rumours convinced the company that it needed to act quickly if it was to be able to make the most of the share price gains.

The same was likely true for Temasek as there has been speculation that it too was about to sell its remaining shares in Hopson after the US-based Tiger Fund sold half its holdings in late September. The two investors bought 100 million shares each in Hopson through a private placement last year at about $5 apeice and are sitting on hefty profits.

On the back of increasing talk of a share sale in the past couple of days, HopsonÆs share price has been very volatile and after dropping 2.3% on Wednesday it was down another 5.1% at one point during morning trade yesterday. This, market watchers say, would have helped convince Temasek to go ahead.

The deal was launched after the end of the morning session at about 1pm and completed and priced by 2.15pm, which enabled the bookrunner to go out and tell the market that the deal was successfully done before trading opened again at 2.30pm. Had it failed to do so, the share price would have continued to drop in the afternoon.

ôIt was a ballsy move (to attempt to complete a deal in that short a time) but it worked,ö says one observer. The fact that Credit Suisse helped the company to raise $128 million through a top-up placement last Friday would have increased its chances of getting it right, though, as it would have been aware of who were still willing buyers, he adds.

The surprisingly upbeat market response to last weekÆs placement also set a good backdrop for the trade with the share price rising 7.9% in the first two days after that sale. Even after the correction on Wednesday and Thursday morning, the stock was trading 10.6% above the last weekÆs placement price of HK$16.60.

YesterdayÆs sale comprised 75.3 million shares that were offered at HK$17.50 to HK$17.80 apiece, which represented a 3% to 4.7% discount to the morning close of HK$18.36. Despite the strong gains since last weekÆs sale, the discount was much narrower than the 6.7% used on that sale.

The share price did drop below the deal price of HK$17.50 when trading resumed in the afternoon, but quickly recovered and spent the rest of the session above that level. It closed at HK$17.68, or 5.8% down on the day.

ôI think the market is willing to accept and absorb the sale because the shares held by Temasek and Tiger has acted as an overhang on the stock which investors are happy to get rid of,ö the source says.

Temasek will hold no more shares in Hopson following this trade, but the Tiger Fund still has about 50 million shares that are locked up for three months following the sale of the other half on September 22.

Like last week, investors were attracted to the stock because of the companyÆs steady unit sales even in the wake of the austerity measures announced in May and June. At the time of its interim earnings in mid-September, the company said it had presold almost 80% of its 2006 completions and over 20% of its 2007 completions. The company has also been successful with its land acquisitions and now sits on a land bank of about 14.7 million sqm, which should last it for about seven years of developments, according to analysts.

YesterdayÆs two deals mean Credit Suisse has completed four placements in less than one week û all on a sole bookrunner basis. Aside from these two and last FridayÆs new share issue by Hopson, the investment bank also helped Hang Lung Properties raise $860 million from the sale of new shares earlier this week.

On Friday last week it also completed a $198 million Singapore IPO for Gems TV, where it was the sole global coordinator and bookrunner for the international tranche.

Together these deals have helped propel the investment bank to number three in the overall ECM league table for Asia ex-Japan from seventh at the end of last week, squeezing ahead of Deutsche Bank, Merrill Lynch, Citigroup and JPMorgan, according to Dealogic data. It has also climbed to the top position for follow-on offerings.
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