Demand for Hopewell high as markets melt down

An unidentified institutional investor successfully sells a 3% interest in the Hong Kong company at a 4% discount to the July 31 closing share price.
An institutional shareholder of Hong Kong-listed Hopewell Holdings braved volatile equity markets on Tuesday night to cash out of a 3% stake in the company. The investor was rewarded with healthy demand, enabling shares to be placed at a discount of just 3.96%.

Through its subsidiaries, Hopewell Holdings develops real estate and invests in property and infrastructure projects, provides agency construction and project management services, as well as runs hotels, restaurants and a food catering business.

Equity markets across the region have been turbulent and sentiment has been mostly bearish, as investors start getting nervous about the fallout of the US subprime situation. On July 27, the Hang Seng Index shed 2.8% to a close of 22,570.41 points. It seemed to open strong on Tuesday, gaining 2.7%, but the recovery was short-lived. The index lost 3.15% on Wednesday to close at 22,455.36.

However, the unidentified seller and arranger Goldman Sachs correctly gauged the market, assuming that the instability would not adversely affect demand for a block of Hopewell Holdings. The book was close to five times subscribed within the three-hour bookbuild, and the selling shareholder pocketed HK$888 million ($113.5 million).

When the book closed, around 50 institutional investors had taken part, of which 50% came from Asia, 30% from Europe and 20% from the US, according to a source close to the deal. Orders were quite evenly distributed across investor categories, which included long-end funds, private banks and retail investors.

"The deal could have priced at the top of the range," says the source, "but given the correction, the arranger wanted to ensure the stock would trade well in the weak aftermarket and hence left some room for the price to adjust."

The seller offered approximately 27 million shares, or 3% of the issued share capital of Hopewell, at an indicative price range of HK$32 to HK$33; the indicative price was a 3% to 6% discount to Hopewell's Tuesday close of HK$34.05. The final price was set at HK$32.7, translating to a 3.96% discount to TuesdayÆs close.

ôThe final price was a fair one, since itÆs very close to the stockÆs closing price (yesterday),ö adds the source. ôI'd note the company traded quite well relative to the overall market.ö

HopewellÆs share price has lost ground over the past few days, in tandem with broader market movements. The stock gained around 70% from August 2006 to mid-May 2007 but has dropped around 15% since. The price started to bounce back in July to reach $35.55 on July 25, but it traded down 8% again in the past few days with a close of HK$32.6 yesterday.

After Hopewell's initial public offering in 1972 it has been in the limelight only sporadically. It spun-off Hopewell Highway Infrastructure in 2003 in a successful IPO and the share price has performed well. According to information from the Hong Kong stock exchange, the companyÆs chairman Gordon Wu and his wife Kwok Sau Ping hold 26.55% of the company.

It is noteworthy that the trade was executed during a time when sentiment on property stocks is bearish. The Hong Kong government sale of a residential site in Kowloon on July 31 for HK$3.98 billion to Kerry Properties caused a slump in prices of property stocks on August 1. The price at which the plot was sold fell short of market expectations, triggering concerns of a widespread correction in property prices in the region.

ôFrom a portfolio perspective the stock is quite tightly held. It doesnÆt trade much. So this was an interesting access point to the stock, and fundamentally people are still positive about Hong Kong and China,ö says the source. ôItÆs got a pretty good cash position and is a solid company.ö
¬ Haymarket Media Limited. All rights reserved.
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