28 Oct 2009
Oct. 28 (Bloomberg) -- Excellence Real Estate Group Ltd., the largest property developer in Shenzhen's Central Business District, delayed a Hong Kong initial public offering that could have raised as much as $1 billion.
Excellence decided not to proceed under the original timetable "in view of the current market conditions for initial public offerings and with the investors' best interests in mind," it said in a statement to the Hong Kong stock exchange late yesterday. It was scheduled to price the share sale today.
Investor fatigue has formed over Hong Kong IPOs of Chinese property companies after 25 of them have raised money in such sales since the beginning 2003, according to data compiled by Bloomberg. This month alone, five Chinese property companies, including Excellence and Evergrande Real Estate Group Ltd., hit the road to market their initial share sales.
"For property companies, there's indigestion because there are so many of them and it's hard from a distance to distinguish them," said Arnout van Rijn, chief investment officer of Robeco Hong Kong Ltd. "It becomes too much of a matter of just competing on price."
Van Rijn helps oversee 1 billion euros ($1.5 billion) of Asian stocks, including Chinese real estate companies. As many fund managers already hold Chinese property stocks, they will not consider the latecomers unless they distinguish themselves by product offerings or attractive valuations, he said.
‘Free Money'
Excellence earlier offered 3 billion new shares, or a 25 percent stake, at HK$2.10 to HK$2.60 each, said an e-mailed sale document sent to fund managers. Yuzhou Properties Co., a Xiamen, southern China-based property developer, yesterday priced a HK$1.62 billion ($209 million) IPO at the low end of a HK$2.70 to HK$3.70 offering range, according to a pricing document sent to investors.
Excellence's was one of the largest Hong Kong IPOs to be delayed this year as investors become increasingly selective about initial share sales amid rising valuations and sometimes disappointing trading performances. Last month, Wilmar China Ltd., the China unit of the world's largest listed palm oil company Wilmar International Ltd., delayed taking orders for a Hong Kong IPO of up to $2.5 billion.
"For a while people thought IPOs were free money but that's gone now," said van Rijn. "Therefore it's much more difficult to place these IPOs."
About one-third of the 37 companies that have gone public in Hong Kong this year have fallen below their IPO prices since trading began, according to data compiled by Bloomberg. That contrasted with a more than the 52 percent rally of the city's benchmark Hang Seng Index.
