sunny-optical-attracts-strong-demand-for-ipo

Sunny Optical attracts strong demand for IPO

The optical components manufacturer raises $132 million after attracting hefty demand from investors.
Sunny Optical Technology, which will be the first Chinese optical components manufacturer to list in Hong Kong, has priced its initial public offering at the top of the range for a total deal size of HK$1.03 billion ($132 million).

When the public offer closed on June 7, the 10% retail tranche was 290 times covered, which equals about $3.8 billion (HK$29.9 billion) worth of demand, according to a source. This triggered a full clawback, which increased the size of the retail portion to 50%. With a high conversion ratio at the roadshow and no price sensitivity, the institutional tranche was oversubscribed by double-digits post-clawback. Some corporates and high-net-worth individuals also piled in the deal.

InvestorsÆ strong interest in the offering was not undermined by market instability during the roadshow and undesirable performance of lately listed-stocks. The Hang Seng Index shed more than 200 points during the first three days of SunnyÆs roadshow, though it climbed back to 20,800 levels and closed at 20,509.15 by the end of last week. Sichuan Xinhua Winshare Chainstore, the most recently listed Mainland company, fell 4.3% in its Hong Kong trading debut on May 30, underperforming a broadly declining market as well as the 2% drop in the H-share index. At one point during the day the bookstore operator was down more than 12%.

ôInvestors are buying on the back of the companyÆs high growth record,ö says one source close to the offering. ôWell-positioned in China, it has a unique business model as it manufactures a broad range of products.ö

Between 2004 and 2006, SunnyÆs net profit surged 1.86 times to Rmb166 million ($22 million). The company is the biggest optical components producer in China with a 40% share of the market.

Investor confidence was also helped by the fact that Thomas Lau Luen-hung, the managing director of Hong Kong-listed retailer Lifestyle International Holdings, was a cornerstone investor in the IPO. Lau paid $10 million for a stake of about 2% of the company.

Sunny manufactures optical components, optoelectronic products and optical instruments, including various lens sets, mobile phone camera modules and microscopes as well as surveying instruments and other analytical instruments. It has 160 domestic and 80 overseas customers, including Panasonic, Samsung, Konica Minolta, Lenovo, Olympus and Huawei, to name but a few.

The pricing at HK$3.82 per share valued the manufacturer at 23 times its 2006 earnings on a fully diluted basis. It was priced at a premium to the Taiwan-listed optical components manufacturers, although the source says there are no direct comparables to the company as products within the industry are very wide-ranging and most companies tend to focus on one specific part of the market.

For instance, Largan Precision, which produces lenses and shutters for cameras, scanners and liquid crystal display (LCD) projectors, trades at 13.3 times its 2006 earnings. Asia Optical, another Taiwan-listed company focusing on making electro-optical products such as optical components, cameras, fax machines and contact image sensors (CIS), trades at 17.3 times its 2006 earnings.

The manufacturer offered 27% of its enlarged share capital, or 270 million shares, at a price between HK$3 and HK$3.82. Of the total, 200 million shares were new, while 70 million, or around 26%, were existing shares. A 15% greenshoe made up of existing shares could increase the deal size to approximately $152 million. BNP Paribas was the sole bookrunner.

Of the net proceeds, Rmb275 million ($36 million) will go towards the expansion of production capacity. Using 2006 as a base year, the companyÆs target is to double and triple its lens and lens set production capacity by 2008. It will increase its capacity of optical instruments by 58% within the same period.

Sunny will also spend Rmb123 million on research and development, Rmb130 million on repaying outstanding bank loans, Rmb25 million on upgrading its IT systems and Rmb28 million buying some land and buildings.

The trading debut was scheduled for June 15.
¬ Haymarket Media Limited. All rights reserved.

Article limit is reached.

Hello! You have used up all of your free articles on FinanceAsia.

To obtain unlimited access to our award-winning exclusive news and analysis, we offer subscription packages, including single user, team subscription (2-5 users), or office-wide licences. To help you and your colleagues access our proprietary content, please contact us at [email protected], or +(852) 2122 5222