HONG KONG -- In the face of jittery global financial markets due to Brexit, Chinese companies, especially those with strong state support, are pressing ahead with their first-time share sales in Hong Kong.
Greentown Service Group, which provides property management services in mainland China, said on Monday that the company was planning to raise between 1.35 billion and 1.71 billion Hong Kong dollars ($220 million) from selling 777.78 million shares at an indicative range of HK$1.74 to HK$2.2 apiece. The company plans to list in Hong Kong on July 12.
The deal came at a time when some issuers such as China Logistics Property Holdings, a warehouse developer backed by U.S. private equity manager Carlyle Group, decided to defer the launch of its $400 million initial public offering in Hong Kong to avoid a heightened "risk-off" mood.
"Brexit, a very unfortunate event, does have some impacts on our initial public offering," said Wu Zhihua, Greentown Service Group's chief operating officer, at a briefing. "But the management believes this IPO is an important part of our strategic plan ... and we have thorough preparations, so we'll try our best to push [it] ahead."
Wu said the company had communicated with its investors since the U.K voted to leave the European Union in a referendum on June 23, leading to global market turmoil. "They are still having tremendous confidence in us," said Wu, claiming that the investors were positive about the company's robust growth and ample cashflows. "They believe we are risk-resistant amid volatility."
Akin to many recent IPOs in Hong Kong, Greentown Service Group also pointed to strong backing from cornerstone investors which had tacitly agreed to a six-month lock-up for guaranteed primary share allocations. All its supporters, which together had subscribed for almost 50% of the issue, if priced at the lower end of the marketed band, are based in mainland China.
Real estate developer Greentown China, owned by China Communications Construction and The Wharf Holdings, a subsidiary of Hong Kong-listed developer Wheelock, is the most dominant among the three cornerstone investors, subscribing for 17.9% of the offering. Yet 18.6% of Greentown China was held by Shou Bainian and Song Weiping, the ultimate shareholders of Greentown Services Group.
The remaining went to state-owned bad-loan manager China Orient Asset Management and Zhejiang Silicon Paradise Asset Management Group, which was founded by the provincial government.
Merrill Lynch and BOC International are the joint sponsors of the transaction.
Market reception for IPOs have been tepid this year. Almost all major listings in Hong Kong this year, including two mainland Chinese banks and Singapore-based aircraft lessor BOC Aviation, are trading below their offer prices.
Yet deals continue to come to the market. At least six more companies will be launching their IPOs this week, including coal testing services provider China Leon Inspection Holding, Hong Kong-based marine contractor Prosper Construction Holdings, Chinese home-builder Hailan Holdings, compound condiment manufacturer Yihai International Holding, medical services provider Rici Healthcare Holdings, and router vendor Plover Bay Technologies.
The $1.2 billion share sale of Orient Securities, Citigroup's brokerage joint-venture partner in China, is expected to complete this week.