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Premium equipment manufacturer Honma Golf priced its Hong Kong initial public offering above the mid-point of its range on Thursday after receiving a contrasting response from institutional and retail investors.
The 133.99 million share issue (pre-shoe) was priced at HK$10, raising HK$1.339 billion ($172.1 million).
At HK$10 per share, pricing was fixed 61.2% through the HK$8.46 to HK$10.98 indicative range, with the institutional book closing just over four times covered but the retail book only just over one times covered.
The Hong Kong public offer was allocated 10% of the deal, which represents 22% of the company’s enlarged share capital pre-shoe.
Bankers said institutional investors had very little price sensitivity and mostly came in at strike. There was also a fair degree of concentration in allocations with almost two thirds of the deal placed with the top 10 accounts.
Pre-shoe the offering will have a market capitalisation of $782.3 million.
“Institutions liked the Honma deal because it’s a premium brand with strong name recognition in Asia and healthy prospects unlike its main comparable Callaway Golf, which is ex-growth,” one banker commented.
New York Stock Exchange listed Callaway Golf has had a strong year and continued to trade up during Honma's IPO process, closing on Wednesday at $11.69, up 24.42% year-to-date.
It is currently trading on a 2017 P/E multiple of about 28.8 times compared to Honma’s pricing at 16.5 times.
One big unknown, which has the potential to affect both companies' share prices, is what will happen to the world’s biggest producer of golf drivers by sales, TaylorMade.
Germany’s Adidas put the company up for sale in May and, so far, only Callaway has ruled itself out of making a bid. Both Adidas and Nike have both opted to concentrate on apparel sales, leaving golf club manufacturing to specialists such as Honma and Callaway.
Morgan Stanley was sole sponsor with Nomura on joint books.
Postal Bank of China trades flat
Honma was priced one day after the world’s largest IPO in two years (in nominal terms) made its Hong Kong debut.
Trading in Postal Bank of China closed up one cent at HK$4.77 after its first day of trading on Wednesday but was back at issue price on its second day at HK$4.76.
Heavy trading saw 1,208.86 shares trade hands over the first two days, amounting to volume of roughly HK$5.752 billion ($741.66 million).
The stock traded in a tight band but Bloomberg trading data show the pressure was uniformly downwards and one fund manager told FinanceAsia the leads had done a good job at stabilization.
“They’ve allowed short-term investors to exit while preventing short-sellers from having an immediate field day, which would have happened if they’d let it go,” the fund manager commented.
Although the IPO raised HK$57.62 billion ($7.43 billion), the freefloat only amounted to $1.71 billion because a massive 77% of the deal was locked away with cornerstone investors, inevitably creating an overhang on the stock in the coming year or so.
