Tian Ge Interactive Holdings and Beijing Urban Construction Design & Development Group join a host of other Chinese companies seeking to list in Hong Kong before June-end, with institutional books opening for both deals this week.
Tian Ge Interactive Holdings, a social video platform operator partially owned by Sina Corp, aims to raise up to $208 million by selling up to 304.3 million shares at between HK$4.50 and HK$5.30 per unit. The shares represent 25% of the enlarged share capital, valuing the company at $832 million.
An exercised greenshoe option could tack on an additional 45.6 million shares, all of which are primary. UBS and CICC are leading the deal, which is scheduled to price on June 30.
Tian Ge has already managed to lock in $80 million from cornerstone investors, including Atlantics Investment Management, Town Health Investment Management and Qihoo 360 Technology Co.
Pre-shoe, Tian Ge is being marketed at 16.8 to 19.8 times expected 2014 earnings, a 35% to 45% discount to its closest peer, US-listed YY Inc.
YY raised $79.8 million in a Nasdaq listing in November 2012 and at the time claimed to have more than 400 million registered users who engaged in real-time group activities like karaoke and tutoring through audio, text and video. Shares in the company are up 38% so far this year, with the company trading at 30.90 times expected 2014 earnings.
It is not uncommon for technology companies to be given such wide discounts since they are notoriously volatile. Chinese technology companies face additional scrutiny due to the government’s censorship initiatives. Although Beijing has been liberalising its financial services industry and continues to ease restrictions on inward foreign investment, censorship remains a very important issue for mainland technology companies.
Institutional books also opened for Beijing Urban Construction Design & Development Group on Tuesday, which wants to raise up to $120 million by pricing 337.3 million shares at between HK$2.75 and HK3.30 each under the leads of CLSA, UBS and China Securities.
An overallotment option could add on an additional 50.6 million shares. Ninety percent of the shares are primary.
The issuer has already locked in the majority of the money through cornerstone investors — CSR Hong Kong, Beijing Capital Land, Beijing Capital Company, Beijing Enterprise and China Construction Investment have together pledged to purchase $70 million worth of shares.
Valuing the company proved difficult, given its construction business and design business are separate, according to bankers close to the deal. “Design businesses have high margins and construction business [have lower ones],” one banker told FinanceAsia.
As such, the syndicate separated the two businesses when calculating their forward earnings forecast. For example, China Railway — whose shares are trading at 6 times expected 2014 earnings and are down 10% so far this year — is considered a peer to Beijing Urban’s construction segment, whereas China State Construction International Holdings — trading at 14 times projected 2014 earnings and down 2% this year — is more akin to its design unit.
Based on this bankers are marketing Beijing Urban at 8 to 9.6 times expected 2014 earnings, which values the company between $435 million to $542 million.