Hong Kong IPOs attract fervent retail demand

PanAsialum, a Chinese manufacturer of aluminium products, and Time Watch, a watch manufacturer, raise a combined $264 million from their offerings, while this year's first Indonesian IPO gets underway.

As investor sentiment warms on the back of the improving markets, PanAsialum Holdings and Time Watch Investments have attracted strong demand from retail investors for their respective initial public offerings.

PanAsialum, a Chinese manufacturer of iPad casings and other aluminium products, has raised HK$1.24 billion ($160 million) ahead of its Hong Kong listing, after fixing the price above the mid-point of the indicative range. The 10% retail tranche was more than 50 times subscribed, which triggered a clawback that boosted this portion of the deal to 40%, a source said yesterday. Accordingly, the institutional tranche was reduced to 60% from 90%.

Meanwhile, Time Watch has raised HK$810 million ($104 million) from its Hong Kong IPO after pricing at the top of the range. The company is primarily engaged in product design and development, assembling, marketing and sales of watches under two proprietary brands — Tian Wang and Balco.

The retail portion of this deal was a few hundred times subscribed and, consequently, it too saw a clawback. This increased the size of the retail tranche to 50% of the overall deal from 10% at launch, according to another source.

PanAsialum and Time Watch will both start trading on February 5.

Before these latest two deals, four companies had completed IPOs in Hong Kong so far this year, raising a combined $523 million, according to Dealogic. The biggest among them was Chinalco Mining Corporation International, a unit of state-owned Aluminum Corp of China and the owner of a greenfield copper deposit in Peru, which raised $399 million.

PanAsialum sold 300 million new shares at HK$4.13 each. The offer price translates into approximately 9.6 times the company’s projected earnings for the fiscal year to September 2013, the first source said.

The deal was marketed at a price between HK$3.46 and HK$4.50, which could have allowed it to raise up to $174 million. The price range translated into approximately eight to 10.5 times the company’s projected earnings in the fiscal year to September 2013.

The base deal size represents 25% of its enlarged share capital. There is a 15% greenshoe that is made up entirely of existing shares.

The deal had no cornerstone investors, but the banks had lined up a number of anchor investors before launch and sources said the IPO was essentially covered after the first day.

The company, which has previously been referred to as PanAsia, has three business lines but in the past two years has been putting increasing focus on the production of aluminium casings for Apple’s iPads. In 2012 this fast-growing business — electronic parts — made up 46.9% of its revenues, compared to just 8.8% in 2010. And analysts say it will continue to grow strongly in the next couple of years, with one syndicate report projecting that it will account for as much as 60% of the company’s overall revenues in the fiscal year to September 2014.

Given its mixed business model there are no direct comparables, but according to a syndicate research report other manufacturers of light metal casings, such as Catcher, Foxconn and Ju Teng, trade at an average 2013 price-to-earnings multiple of about nine. Suppliers of more general aluminium products, including Hong Kong-listed China Zhongwang and a number of Shanghai-listed names, trade at an average 2013 multiple of just over 12 times.

HSBC and J.P. Morgan, which have been working on the IPO for more than two years, were joint global coordinators for the deal. ABC International and UBS joined them as bookrunners and Bocom International, CICC and Platinum Securities were given the role of joint lead managers after they all brought valuable orders to the deal.

Time Watch
Time Watch offered 600 million shares at HK$1.35 each, which represented an annualised 2013 P/E multiple of 9.3 times, the source said. Some 83.3% of shares were new, while the remaining 16.7% were secondary shares.

The deal was marketed at a price between HK$1.11 and HK$1.35 and priced at the top end of the range. There is a greenshoe option of up to 15%.

The company, which was wholly owned by the founder before the IPO, will have a free-float of 30% at the time of listing (pre-greenshoe), according to a term sheet.

The company had signed up two cornerstone investors prior to the launch — Orchid Asia V and Orchid Asia V Co-Investment — which agreed to invest a combined $26 million, according to the company’s prospectus. The cornerstone tranche accounts for about 25% of the total deal, based on the IPO price.

Due to the strong retail demand, the retail and institutional portions now each account for 50% of the deal, from the initial plan for a 10-90 split.

Time Watch plans to use 25.7% of the proceeds to establish joint ventures with watch retailers and 24.1% to open about 60 new points of sales (POS) in the year ending June 30, 2013, and about 200 POS in each of the following two years, according to the prospectus. The rest will be used for other purposes, including marketing and promotional activities and the repayment of bank loans.

DBS was the sole global coordinator and sole bookrunner for the deal. It was also a joint sponsor together with CIMB.

Steel Pipe
Elsewhere, Steel Pipe Industry started the international roadshow yesterday for its Indonesian IPO of between Rp754 billion and Rp1.13 trillion ($76 million to $114 million). It is poised to be the first new listing in Indonesia this year. The country saw $1.1 billion worth of IPOs last year, down from $2.2 billion in 2011, according to Dealogic.

The Indonesian company is offering up to 2.9 billion new shares at a price between Rp260 and Rp390 each, according to a term sheet. The offering size represents 40% of the enlarged share capital. PT Steel Pipe is a manufacturer of a wide range of steel pipes, tubes and other related products.

The company plans to use part of the proceeds to fund the establishment of a new production facility in Gresik, to expand its existing facility in Karawang, and to improve and upgrade its existing facilities in Surabaya and Pasuruan. It also intends to use some of the money to repay a bank loan.

The international roadshow will continue until next Monday (February 4), with pricing and allocation expected the following day. The retail offering will start on February 14 and last until February 18. The listing is scheduled for February 22.

Nomura is the sole international selling agent for the deal, and a joint bookrunner together with AAA Sekuritas.

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