Greenland secures $219m from share sale

The Chinese real estate developer experienced strong demand in a block trade Friday amid a surge in share price performance.

Greenland Hong Kong Holdings raised $219 million from a secondary share sale on Friday night after pricing shares towards the top end of the price range, after a pronounced upturn in stock performance.

The real estate company offered 200 million primary shares at a price range between HK$7.30 and HK$7.50 per unit, representing a 5.4% to a 7.9% discount to the May 14 closing price of HK$7.93 per share, according to a term sheet seen by FinanceAsia. The base deal size accounted for 10.5% of enlarged share capital.

A recent 4.1% drop in Hong Kong's Hang Seng Index since late April did not deter investors, with one source close to the deal noting that several anchor investors placed orders towards the top of the price range before the bookbuild began Friday evening in Hong Kong.

The share sale included an upsize option of 28 million shares — or $28 million — to the base deal of $191 million.

Shares priced early Friday night in Hong Kong at HK$7.46 per unit, a 5.9% discount to the May 14 close, under the leads of HSBC, Morgan Stanley and Haitong International.

The book was multiple times covered across the price range, which allowed the issuer to exercise the full upsize option and bring the total deal size to $219 million, a second source close to the deal told FinanceAsia. There were over 70 lines in the book, with the top 10 allocations receiving more than 70% of the deal.

A good portion of the final book was made up of Chinese money, mainly long-only institutional investors, although US and European hedge funds participated. “There was a good mixture of demand from different parts of the world, even the US, despite the fact the book closed at 6pm Hong Kong time on Friday,” the second source said.

There were also quite a few existing shareholders keen to top up on their exposure.

The deal has increased Greenland Hong Kong’s freefloat by 40%.

Hong Kong’s Hang Seng Index fell 4.1% from April 28 up to May 14, although recovered on May 15, closing at 27,882.28. The Shanghai Stock Exchange Composite Index meanwhile has been relatively flat during the same timeframe.

Potential investors in Greenland Hong Kong had to decide whether the recent bull market run in China and Hong Kong is experiencing a temporary pullback, or has run its course. Given the real estate company was able to price shares towards the top of the price range, it appears investors viewed the retreat as temporary and maintain confidence that Greenland Hong Kong has plenty of room for upside, mainly because of its internet finance initiatives.

“It’s a name that bid very well because of the internet finance business they’re diversifying into,” the first source close to the deal told FinanceAsia. “There are a lot of people who want to add [the company’s stock] even though it has run up.”

“There’s still good appetite for the right names,” the second source added.

Year-to-date, Greenland Hong Kong’s shares are up 157.5%. It is trading at 19.9 times its 2015 earnings, and 16 times 2016 earnings.

Greenland Hong Kong’s valuation is higher compared to its peers, which include Sino-Ocean Land Holdings, Poly Property Group and China Merchants Land. Sino-Ocean is currenlty trading at 9.01 times its 2015 earnings, while Poly Property and China Merchants Land are trading at 13.90 and 13.36 times 2015 earnings, respectively.

Greenland Hong Kong, a subsidiary of China’s Greenland Group, plans to form an online real estate financing platform to target small- to mid-developers seeking fundraising on the mainland.

On April 13, Greenland Hong Kong announced plans to start an internet real estate financing platform — Dichan Bao — along with Alibaba’s Ant Financial and Ping An.

It will also set up three funds — the first of which will invest up to $1 billion in real estate opportunities on the mainland; the second, a special situations vehicle that will partner with other asset management companies to target domestic non-performing assets; and the third, an infrastructure fund to partner with government institutions for urbanisation projects, according to ICBC research dated April 23.

In addition to its online financing initiatives, strong sales numbers also appealed to investors. First quarter sales jumped 129% over the same prior year quarter. Its revenues declined however to Rmb2.84 billion ($457.7 million) in 2014, a 48% drop from Rmb5.45 billion in 2013.

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