China Vanke is likely to name Citic Securities as the main bookrunner for the transfer of its Shenzhen-listed B-shares to the Hong Kong Stock Exchange, according to sources.
Citic is currently acting as financial adviser to Vanke on the highly awaited conversion, but sources say the firm will take on a more significant role. A spokesperson at Citic declined to comment.
It will not be a lucrative deal for the Beijing-based brokerage, as Vanke is listing by introduction and not raising any new funds. However, helping China’s biggest residential property builder in its move to Hong Kong and managing one of the first B-share to H-share conversions should bring its own reward.
Citic is keen to position itself as a heavyweight global investment bank. Executives have said previously that Chinese investment banks “enjoy advantages” in taking lead roles on such cross-border transactions.
Citic earned $236 million in investment banking revenues during 2012 — more than any of its peers, including second-placed Bank of China with $194 million and third-placed Guosen Securities with $161 million, according to Dealogic.
For Vanke, the H-share listing makes sense. It already has an A-share listing, but is the only leading property player on the mainland without a listing in Hong Kong. As such, analysts are optimistic about the move and reckon it will greatly increase liquidity in the company’s shares.
“The listing paves the way for fundraising in the future as the B-share market has pretty much lost its function as a fundraising platform,” said Frank Miao, a real estate analyst at Haitong Securities.
Hong Kong-listed property developers are trading at an average of 15 to 16 times their 2013 forecast earnings, according to Haitong. Vanke’s B-shares, however, are trading at half that valuation.
Yu Liang, president of Vanke, said the company aims to improve its corporate governance, attract more international investors and gain more real estate knowhow.
But Vanke will continue to focus on the domestic market. “The state housing-price index covers 70 large and middle-scale cities, but Vanke only has projects in 60 cities nationwide, we have a lot of room to grow in China,” he said at a press briefing in Shenzhen last week.
More B-share companies are set to follow Vanke to Hong Kong to escape the country’s experiment in foreign-denominated shares.