Sunny Optical raises $101 million from top-up placement

The Hong Kong-listed manufacturer of camera modules for smartphones and tablets attracted more than 40 investors and priced the offering at a 4.4% discount.
Sunny Optical is a key supplier of optoelectronic modules to smartphone manufacturers such as Huawei, Lenovo, Coolpad, Oppo and Samsung.
Sunny Optical is a key supplier of optoelectronic modules to smartphone manufacturers such as Huawei, Lenovo, Coolpad, Oppo and Samsung.

Hong Kong-listed Sunny Optical Technology, a Chinese manufacturer of camera modules for mobile devices, has raised HK$781.8 million ($101 million) from a top-up placement, making it the latest issuer to take advantage of the recent recovery in sentiment for Chinese stocks.

The deal, launched after the Hong Kong market closed on Monday, came on the back of four consecutive days of declines in its share price, but after the company had secured large new orders from Samsung. The combination of the two, together with improving economic data out of China, may have helped support the demand.

According to a source, the share sale attracted a lot of interest from fundamental investors and the offering was almost two times covered when the order books closed at 8pm Hong Kong time on Monday. More than 40 accounts submitted orders.  

The deal comprised 97 million shares, which accounted for 9.7% of the existing share capital and 11 days of trading, based on the average daily volumes in the past there months. The shares were offered at a price between HK$8.01 and HK$8.22 apiece, which translated into a discount of 2.5%-5.0% versus Monday’s closing price of HK$8.43.

The strong demand and the fact that the order book was anchored by high-quality long-only investors allowed the bookrunner to fix the price above the bottom of the range at HK$8.06 per share, resulting in a 4.4% discount.

The sources said about 60%-70% of the demand came from long-only investors, primarily international and Asian funds based in the region. The rest was contributed by hedge funds.

The deal was done as a top-up placement that saw controlling shareholder Sun Xu first sell existing shares to investors and then buy the same number of new shares at the same price from the company. This structure allows the deal to be completed quicker than if Sunny Optical was to issue new shares directly to the market, but still ensures that all the proceeds ends up with the company.

Sunny Optical did not specify what it will use the money for, saying only that it will go towards general working capital and future developments.

Sun Xu is controlled by Wang Wen Jian, founder and honorary chairman of Sunny Optical. Prior to the placement, it held a 42.2% stake in the company. The seller and the company itself have both committed to a three-month lock-up following the transaction.

Sunny Optical’s share price has fallen 8% in the past four sessions and is off 27% from its 2013 high of HK$11.56, which it hit in mid-May. But the stock is still up about 65% year-to-date and two-thirds of the 27 analysts who cover the company have a “buy” recommendation on it. The average 12-month target price is HK$10.23, suggesting a further 21% upside from its current levels.

The company is a key supplier of optoelectronic modules to smartphone manufacturers such as Huawei, Lenovo, Coolpad, Oppo and Samsung, and ranks as the number one manufacturer of handset camera modules in China, as well as the number one provider of vehicle lens sets globally in terms of market share. This year it also started mass production of 3D touchless motion controllers, which are widely used in SmartTVs.

In its first-half results published in mid-August, the company said it continued to benefit from the growth of smartphones and tablet PCs, while demand for digital cameras was weak. On the back of that, it posted a 57.4% increase in revenues to Rmb2.79 billion ($456 million) and a 25.7% improvement in net profit to Rmb197 million.

According to the interim report, revenues from optoelectronic products, including handset camera modules, grew by 97.4% and accounted for approximately 76.1% of the total revenues in the six months to June. Optical components accounted for approximately 20.2% of the total revenue and optical instruments for 3.7%.

Nomura was the sole bookrunner for the top-up placement.

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