AAG Energy, China's leading independent coal bed methane producer (CBM), priced its IPO at the very bottom of its indicative range on Wednesday after being hit by cooling market sentiment and perceptions of a high valuation.
Joint sponsors CICC and HSBC fixed the IPO price at HK$3 per share compared to an initial range of HK$3 to HK$3.7.
They also cut the greenshoe back by almost by half to 8%, which means the flotation is set to raise a total of HK$2.466 billion ($318.07 million). This comprises HK$2.284 billion ($294.7 million) from the base deal of 761.4 million shares and HK$182.44 million ($23.5 million) from the greenshoe.
The Hong Kong IPO closed about five times covered, so no clawbacks have been triggered and retail investors will be allocated 10%.
Investors say they were told the institutional order book closed a couple of times covered, with price sensitivity all at the bottom of the range. However, given that five cornerstone investors had already accounted for $229 million of the paper on offer, this means there was effectively only $59.5 million being allocated to other institutions.
The majority came from Asia, of which China accounted for the biggest chunk, with the US taking up the largest component of the non-Asian book.
The five cornerstones comprise: Shenzhen Tongyu on $70 million, Addor Fund on $50 million, CMH $49 million, Beibu Gulf Fund $50 million and Sichuan Datong Gas $10 million. They will be subject to a six-month lock up.
One source close to the deal said, "The book was covered on day one and by day two there was demand all along the price range. Unfortunately market sentiment cooled quite sharply after that and it had an impact."
The Hang Seng China Enterprises Index closed down on five out of seven trading sessions during the bookbuilding period, although it did rally 1.22% on Thursday following the Chinese government's approval of mixed ownership reforms.
However, one investor told FinanceAsia he was not particularly happy with the valuation and consequently did not participate. He says, "They lowered it after pre-marketing, but even at HK$3 per share the company is still being valued at 8.5 times 2015 EV/Ebitda."
Listing is scheduled for June 23
Red Star Macalline
The institutional order book for the HK$7 billion to HK$8.3 billion ($901 million to $1.07 billion) IPO for Chinese furniture and building materials retailer Red Star Macalline will close one day early on Thursday.
At Wednesday's close in Asia, the order book was reportedly multiple times oversubscribed with a surge of orders flowing in at strike (no price sensitivity).
The deal is being pitched on a price range of HK$11.18 to HK$13.28, which equates to a p/e range of 13 to 15.5 times 2015 consensus net profit forecasts of Rmb2.54 billion ($409.1 million).
The company is offering 625.13 million primary shares pre greenshoe, or 16.9% of its enlarged share capital. The greenshoe also constitutes primary shares.
At the top end of the price range, this will equate to a market capitalization of $6.33 billion.
The deal has the standard 90% and 10% split between institutional and retail investors. A retail oversubscription ratio between 10 to 20 times will led to a 15% clawback, followed by 20% at 20 to 40 times and 35% if the retail book closes more than 40 times covered.
Joint sponsors are CICC, Goldman Sachs and Morgan Stanley with Citigroup and CMS as joint global co-ordinators.
Joint bookrunners are BNP Paribas, CIMB, Cinda International, CMB International and ICBC.