Shimao's solid HK debut may help Greentown
05-07-2006

By Daisy Ku, Reuters

Shimao Property Holdings Ltd's solid Hong Kong debut on July 5, following weak demand for its initial public offering, should bode well for Greentown China Holdings' US$410 million (RM1.5 billion) IPO, investors said.

Market sources said Greentown, which has attracted Singapore investor Temasek Holdings and buyout house Warburg Pincus, had seen its institutional portion two to three times covered.

Local brokers expect the deal to attract sufficient retail interest before it closes the order book on July 6.

"Sure, Shimao's performance will help Greentown... it shows that the worst is over," said Clive Zhang, a fund manager at Partners Capital Asset Management.

Last week, privately run Shimao priced its IPO at about 40% below its net asset value, or HK$6.25 each (RM2.93), the bottom of an indicated range, after generating weak investor demand -- 2.5 times subscribed in the institutional portion and only 54% covered in the retail tranche.

Despite the poor reception, shares in Shanghai-focussed Shimao rose about 10% in their US$477 million Hong Kong trading debut on July 5as market sentiment towards China-related stocks showed improvement.

"Chinese property stocks have rebounded in the last couple of weeks. Although regulatory uncertainties remain, there are still high levels of interest in Asia's property stocks," said one Hong Kong-based property fund manager.

Investors have been worried about the threat of higher interest rates as well as China's efforts to cool a surging property market in cities such as Shanghai, although sentiment towards Hong Kong-listed Chinese companies has improved, with the index of such stocks rising 16% since mid-June.

Shares in Shimao jumped to HK$7.00 each before ending the morning trading session at HK$6.80.

At HK$7.00 per share, Shimao trades 33% below its net asset value of HK$10.50 each, roughly in line with other Chinese property stocks.

Market sources said that because of the improved sentiment, more institutional orders had been placed near the middle of Greentown's proposed range.

Some market participants, however, pointed to Greentown's wide price range as a risk.

"I'll prefer China Resources Land or China Overseas Land in that case. The listed stocks usually have better value," said Zhang.

Greentown is selling shares between HK$6.57 and HK$9.86 each. That represents a 20% to 47% discount to its net asset value of 16.6 billion yuan (RM7.57 billion). -- Reuters