CRC cement IPO facing rough ride: Analysts
Updated: 2009-10-06 06:46
By Joey Kwok and Lillian Liu(HK Edition)
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HONG KONG: Despite an 83-fold oversubscription rate, the China Resources Cement Holdings' Hong Kong IPO is, according to analysts, likely to be a disappointment. They expect the stock to tumble in its trading debut today, depressed by the negative sentiment expressed in and created by the string of recent flops in initial public offerings (IPOs) in the city.
Boosted by oversubscription from retail investors, the cement producer has increased its shares issued in its Hong Kong public offering to 655.2 million from 163.8 million, according to a statement filed with the Hong Kong stock exchange yesterday.
China Resources Cement, a unit of China Resources, has set its offer price at HK$3.90, the top end of its HK$3.20 to HK$3.90 range, after receiving 89,540 applications from retail investors.
Subscribers who have applied for a one board lot will have a 70 percent likelihood of getting the new shares, while those down for nine board lots will secure at least one.
The company is expected to receive net proceeds of around HK$6.13 billion from its global offering, of which 38.7 percent will be allocated to strengthening its production lines in 2009 and 2010.
Billionaire investment guru Lee Shau-kee has invested $100 million, around HK$775 million, in China Resources Cement, yet his another top pick China South City plunged 22.9 percent in its trading debut on September 30, suggesting that heavyweight investor support is no guarantee of success.
A more potent factor may be that the market has been anticipating a cool-off in the red-hot IPO sentiment that prevailed until recently, as a number of recent new listings saw a dip below their offer prices on their trading debuts.
Ricky Tam, director at Champlus Asset Management, said China Resources Cement may drop 10 percent below its offer price in its first day of trading today.
"Some retail investors, who have oversubscribed the new shares in the public offering, may sell off some shares after the listing. That will put pressure on its share price," Tam said.
He added that the new shares may slump to HK$3 after the debut, in the face of intense competition from other cement shares listed on the city's bourse.
Castor Pang, research director at Cinda International said the performance of US stocks may impact its debut today, as the mainland stock markets are closed for National Day holidays.
Companies that have started trading on the Hong Kong bourse, despite a weak market over the last month, still have a big demand for cash, Pang noted.
"Upcoming share issuers will need to offer their shares at lower prices to attract subscribers," Pang said, adding that the coming months will see fewer share sales in the city, as potential issuers are concerned that market sentiment may sour their shares' debuts.
(HK Edition 10/06/2009 page4)