HONG KONG: As investors remain selectively enthusiastic in the mainland's property market, Longfor Properties has priced its initial public offering in Hong Kong at the top end of an indicated range boosted by high demand.
Longfor, the biggest developer in China's Chongqing, has raised HK$7.07 billion in a new share sale, market sources told Reuters yesterday.
An influx of mainland property players is creating a mini-flood of hopefuls looking to make the most of high valuations generated by a 100 percent rally in the benchmark Hang Seng Index.
The developer sold 1 billion new shares, or a 20 percent stake, at HK$7.07 per share.
Cornerstone investors include billionaire George Soros, who bought HK$200 million worth of shares, and China Investment Corp (CIC), which also invested through the international tranche.
Longfor's share price range indicates around 12 to 14 times the company's forecast earnings next year. That is higher than its home rival R&F, which trades at 11 times next year estimate earnings, while share prices in Greentown China represent 9.9 times forecast next year earnings.
Longfor said earlier this month it plans to use 48 percent of the proceeds to acquire new projects and 47 percent to finance outstanding land costs of existing projects.
Longfor has signed up five other investors, including the Government of Singapore Investment Corp, Temasek Holdings, Hong Kong Land, Ping An Insurance and Bank of China Group Investment, for a combined $197.5 million worth of shares.
According to the prospectus, Temasek and Government of Singapore Investment Corp, managers of more than $100 billion of the city-state's foreign reserves, will each take $50 million of the offer. Citigroup Inc, Morgan Stanley and UBS AG are arranging the sale.
Hongkong Land Holdings Ltd, one of the biggest office landlords in the city's central business district, will take $37.5 million and Ping An Insurance (Group) Co will take $30 million.
The deal has attracted about $10 billion worth of orders, or about 12 times the number of shares earmarked for institutional investors, in which more than half are long-term funds and hedge funds, another source close to the deal said.
The company also generated orders for 56 times the shares initially on offer for Hong Kong retail investors. It will trigger a clawback option to increase the retail portion of the global offering to 40 per cent from an initial 10 per cent.
Agencies contributed to the story
(HK Edition 11/13/2009 page3)