GF Securities starts roadshow for $3.6b HK IPO

18 cornerstone investors have subscribed to $1.87 billion shares, representing more than 50% of the deal.

GF Securities starts roadshow Monday for its initial public offering in Hong Kong to raise up to $3.6 billion, the largest listing in Asia so far this year.

China’s fourth-largest broker by assets is selling around 1.48 billion primary shares at a price range of HK$15.65 to HK$18.85. There is a 15% greenshoe with the offering, which could enlarge the deal size even bigger to $4.1 billion.

The price range translates to a 2015 forecast price-to-book of 1.4 to 1.6 for GF. This means the broker is selling the H-shares at a discount of 62% to 67% to its A-shares, based on the A-shares’ last closing at 4.2 times P/B ratio on Friday.

With the attractive discount and valuation, the deal has generated strong interest from institutional investors after a week of premarketing and secured orders of $1.87 billion from 18 cornerstone investors, making more than half of the deal already sold out.

Among the cornerstone investors, Taiwan-based Fubon Financial has bought $300 million shares, while Bank of Communications and investment fund China Minsheng Investment have each taken $200 million of the shares. Chinese developer Greenland Group and train maker CSR, which is undergoing a merger with its peer China NSR, have subscribed to $70 million and $50 million, respectively.

One interesting thing is that all of the 18 are from mainland China and Taiwan. One banker on the transaction said Chinese investors, compared with global funds, are more familiar with and have more business relationship with the company.

In 2014, GF Securities’ total revenue and net profits rose 63.20% and 78.6% to Rmb13.39 billion and Rmb5 billion, respectively, according to its annual report.

The Guangzhou-based broker plans to set the price on March 31 Hong Kong time. The split between insitutional and retail tranches is 95% and 5% subject to the clawback mechanism, where retail tranche will be capped at 20%.

Bankers hope that the deal will generate momentum for upcoming broker fundraisings in the Hong Kong market, including a $2 billion to $3 billion IPO from Huatai Securities expected in June and a $300 million IPO from Guolian Securities in the second half.

Bank of America Merrill Lynch, BoCom International, Deutsche Bank, GF Capital (Hong Kong), Goldman Sachs and Morgan Stanley are joint global coordinators of the GF Securities IPO. They are also joint bookrunners with ABC International, CCB International, China Merchants Securities, China Securities, CIMB, Guosen Securities, HSBC, Huatai Financial, ICBC International, Industrial Securities Hong Kong and Sun Hung Kai Financial.

A full list of cornerstones follows as:

1. Fubon Life Insurance ($300mn)

2. L.R. Capital Principal Investment ($250mn)

3. The Asset Management Center of Bank of Communications ($200mn)

4. CM International Capital ($200mn)

5. Xi Zang Energy Investment ($120mn)

6. Hua Xia Life Insurance ($100mn)

7. Hwa Bao Investment ($100mn)

8. Haier Electronics Appliances Second Holdings (BVI) ($100mn)

9. J&P (China) Capital Management ($100mn)

10. Greenland Financial Overseas Investment Group ($70mn)

11. Zhehao Asset Management(Shanghai) ($70mn)

12. Zhongxinjian Merchant Equity Investment (Rmb370mn)

13. Foresea Life Insurance ($50mn)

14. CSR (HK) ($50mn)

15. Cinda Sinorock Global Portfolio Limited Partnership I ($50mn)

16. Veritas Asset Management LLP ($32mn)

17. CTBC Securities ($10mn)

18. CTBC Life Insurance ($10mn)

The story has been updated to show the full list of deal arrangers and cornerstone investors.

¬ Haymarket Media Limited. All rights reserved.
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