Lead managers CLSA and BOCI with ING respectively priced hugely successful deals for P-chip Ports Design and H-share AviChina Industry and Technology after Friday's close.
AviChina has instituted the maximum clawback on its 1.59 billion share deal after the retail order book closed 150 times oversubscribed, with demand of $3.8 billion. Similarly impressive subscription levels were seen on the international side, with investors placing orders for $3 billion and books closing 13.5 times covered.
This led AviChina, the civil unit of Chinese government-owned defense group Aviation Industry Corporation of China II (Avic II), to price at the very top end of its indicative price range. Pre-greenshoe, the group has raised HK$1.94 billion ($248 million) at a price of HK$1.21 per share.
Initially, the transaction had the standard 90%/10% split between institutional and retail investors. However, retail investors will now get bumped up to 40% and a strategic stake by EADS will also eat into the international placement. The French aerospace group will account for 5% of AviChina's issued share capital, with the freefloat totaling 35%.
Observers report participation by 326 investors in the international tranche, of which 190 came from Asia and 141 from Europe. About 70% were institutional investors, with the rest split between private banks and corporate investors.
Asian investors are said to have been particularly focused on the auto manufacturing side of the company's equity story, while European investors latched onto the upside potential of the company's aerospace businesses. "This aspect of the company is not well understood in Asia because there are so few comparables," says one observer. "But European investors saw a lot of value."
On a P/E basis, AviChina was marketed at 10.2 to 13 times 2003 earnings and priced at 13 times. By comparison Chinese auto manufacturers such as Denway Motors, Brilliance China and Qingling Motors are trading at respective P/E multiples of 14.08, 12.39 and 16.8 times. On this basis, AviChina has priced at the standard 10% IPO discount to the sector average.
However, global aerospace companies tend to command higher multiple. EADS, for example, is currently trading at 21 times 2003 earnings, as is US aerospace giant Lockheed Martin.
About 83% of AviChina's sales come from mini-vans and cars that have engines smaller than one litre. The company currently has a 40% share in this market, which primarily competes on price.
A further 17% comes from its aviation businesses, primarily helicopters. This side of the business is dominated by government contracts, which account for about 60% of revenue, although the company is also responsible for 95% of non military aircraft exported by China.
The company is forecasting net income to total Rmb449 million ($52.2 million) at the end of the 2003 Financial Year, a 13% increase year-on-year.
A 35 million share IPO for upscale fashion house Ports Design was also priced after Friday's close. Pre-greenshoe, the transaction raised $47 million at pricing of HK$10.50 per share.
This was slightly off the top end of a HK$9 to HK$10.83 indicative range and reflected managements' desire to leave a little upside on the table for investors during secondary market trading.
But just like AviChina, the order book was heavily oversubscribed, with the retail IPO closing 90 times oversubscribed and the international placement 20 times covered. As a result, the retail IPO will be increased to 40% of the overall deal.
On listing, the company will have a freefloat of 35% and this will also include a stake held by Suez Asia Holdings, which has reduced its holding from 15% to just under 5% as a result of the IPO.
Ports Design is a vertically integrated fashion company, which makes and sells its own brand clothes. In 2002, the company also gained the top slot in a brand awareness survey by AC Nielson, beating all its foreign competitors such as Chanel, Gucci and Louis Vuitton.
A profile of the company's CEO and president Alfred Chan can be found in this month's edition of FinanceAsia magazine.