NVC Lighting raises $198 million from Hong Kong IPO

The shares are priced at the low end of the range, but interest is strong enough to trigger a clawback, boosting the size of the retail tranche to 30%.

NVC Lighting Holdings has brought a dim light of hope to the otherwise fairly gloomy market for initial public offerings. The deal sailed through the Hong Kong IPO market and received enough interest to trigger a clawback that increased the allotment to retail investors to 30% from 10%. The institutional portion was multiple-times covered.

That makes this deal something of a hit, especially since it was in the market at a time when several major IPOs were either cancelled or postponed due to volatile conditions and rising risk awareness.

The company, which produces and sells lighting products in China and is part owned by Goldman Sachs, raised HK$1.53 billion ($198 million) after fixing the price at HK$2.10 per share. The final price is close to the low end of the indicated range between HK$2.03 and HK$2.90, and represents a price-to-earnings ratio of 15.5 times, based on 2010 projections.

The interest, which included a subscription ratio of 38 times for the retail tranche, was underpinned by very convincing presentations from the NVC executives during the roadshow, which helped minimise investor concerns, bankers involved in the deal said.

The company's strategy of switching to energy-saving lighting products, which is in line with the topical theme of new energy development, also helped attract interest, sources said.

The participation of Citic Securities as a cornerstone investor in the deal, with a commitment to buy $20 million worth of shares, is also said to have helped attract orders. The company signed up two other cornerstones: CCB International Asset Management which bought $10 million worth of shares, and Shine Profit Assets which invested $15 million.

However, some investors were worried about the secondary market trading, given the current pessimistic sentiment, and these investors thought the final price of HK$2.10 was expensive, one source said.

The deal comprised 25% of the company, or 727.54 million shares, of which 95.4% were primary shares and 4.6% secondary shares. It comes with a 15% greenshoe option which could see the company sell an additional 109.13 million shares -- 95% new and 5% secondary -- and stretch the size of the deal to as much as $228 million. The shares will start trading on May 20.

Goldman didn't sell any shares in the IPO, but its stake was diluted to 7.2% from 9.4% as a result of the issuance of new shares. The US investment bank is also a joint bookrunner on the transaction together with HSBC.

NVC started taking orders last Monday and during the bookbuilding period some highly-anticipated share sales were either scrapped or delayed, which heavily dampened sentiment in the global IPO market. Late last week, Swire Properties cancelled its up to $2.7 billion IPO in Hong Kong and New Century Shipbuilding abandoned its up to $484 million Singapore public offering, both citing volatile market conditions. MIE, a Chinese oil and gas company, was supposed to price a downsized deal on Tuesday, but the US IPO was postponed after the involved parties failed to agree on a price.

The Hong Kong benchmark Hang Seng Index has dropped 6.4% so far this year to 20,422 points yesterday. The Shanghai stock index has tumbled more than 16%, making it one of the worst performing markets in the region year-to-date.

But, according to FTSE Group and Renaissance Capital, the weak market brings good opportunities to invest in IPOs. Weakness in the equity markets results in the issuance of higher quality companies, and IPOs are brought to market at more attractive valuations, the two firms said at a press briefing yesterday, which was called to announce the new FTSE Renaissance Asia Pacific IPO Index Series.

A total of 10 IPOs have been completed on the Shanghai Stock Exchange this year, raising a combined $7.96 billion, while the Hong Kong bourse has recorded 18 new listings worth a total of $5.57 billion. Across all Asia-Pacific exchanges, there have been 267 IPOs, raising a total of $51.65 billion, so far this year, according to data provider Dealogic.

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