ESR Cayman, the operator of logistics warehouses and industrial real estate, was lucky the second time around in the capital market, as its shares advanced in their Hong Kong stock exchange trading debut.
ESR shares finished the day on Friday at HK$17.70, or 5.4 per cent above their initial public offering price of HK$16.80.
The offer, which raised US$1.6 billion for the Warburg Pincus-backed company, was the second-biggest in Asia and on the Hong Kong stock exchange this year after the US$5.8 billion IPO in September by Budweiser Brewing Company APAC, according to Bloomberg data.
ESR traded as high as HK$18.06 in the first hour of Hong Kong’s morning session. Five of the largest offerings this year in Asia have had mixed debuts. China Railway Signal saw its stock price double, while Budweiser posted a 4 per cent gain on September 30 and Bangkok-based Asset World had a flattish performance in Thailand this month.
“In the first go-around in the first few months, we got sandwiched in-between the geopolitical events. There are so many things you can’t control,” said Jeffrey Perlman, the ESR chairman and a managing director at Warburg Pincus. “The feedback we got from prospective investors [was that] they really want to see this as a public company. On the back of the successful IPO, it certainly gives us a lot of conviction alongside that feedback we got from the market.”
Budweiser and ESR both had a change of heart this summer, when they postponed their fundraising plans amid Hong Kong’s escalating civil unrest, after an estimated 1 million people marched in opposition to a controversial extradition bill. Since the postponement of their IPOs, Hong Kong’s worst political crisis in decades had descended into frequent street clashes between police and protesters.
Still, market sentiments improved, helped by two successive quarter-point cuts in base lending rate by Hong Kong’s monetary authority last quarter, acting in lockstep with US Federal Reserve policy. That put a floor on market valuations, prompting both Budweiser and ESR to dust off their shelved plans and return to the market.
The revived ESR listing is a positive sign for Hong Kong Clearing and Exchanges Limited (HKEX), the bourse operator, putting it back in the race for the top venue for new stock offerings worldwide. Since September 1, Hong Kong has outpaced the New York Stock Exchange and Nasdaq, after lagging behind the two rivals in the first eight months of the year, Bloomberg reported.
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The aftermath of Hong Kong’s protests piled on the effects of the year-long US-China trade war, which have already weakened the city’s economy. Visitors stayed away, and retail sales were crimped, pushing the economy into a larger-than-expected contraction in the third quarter, and into its first technical recession in a decade. Hong Kong Chief Executive Carrie Lam Cheng Yuet-ngor said on Tuesday blamed the slump on the protests, saying the economy is “likely to have negative economic growth for the full year”.
Several companies have joined Budweiser and ESR in reviving their listings on the Hong Kong stock exchange since Lam said she would formally withdraw the bill in September and investor sentiment has improved.
China Feihe, the Beijing-based baby milk formula maker that counts actress Zhang Ziyi as a spokeswoman, aims to raise as much as HK$8.93 billion (US$1.14 billion) in a Hong Kong listing in November, according to an offer document seen by the South China Morning Post.
SinoMab BioScience and China PengFei Group, the world’s largest supplier of rotary kilns, announced plans this week to raise a combined HK$1.95 billion.
Chinese e-commerce giant Alibaba Group Holding is planning to revive its US$15 billion secondary listing in Hong Kong as soon this month, Reuters reported on Thursday. Alibaba, the owner of South China Morning Post, relocated its US$25 billion IPO to New York in 2014 after failing to win regulatory approvals in Hong Kong. That IPO remains the largest on record, globally.
ESR was formed by the merger of e-Shang and the Redwood group in January 2016 and is the biggest logistics real estate company focused on the Asia-Pacific region, with operations in Australia, China, India, Japan, South Korea and Singapore. It also manages a range of funds and investment vehicles, consisting of US$20.2 billion in assets under management.
ESR’s first-half net profit rose 32 per cent to US$84.1 million from a year earlier. Revenue jumped 66 per cent to US$155.8 million. It intends to use US$565.5 million of net proceeds from the IPO to repay debt, to redeem preference shares and to develop additional logistics properties.
The Ontario Municipal Employees Retirement System, a Canadian pension fund, acted as a cornerstone investor in the ESR offering, in which it would own a 9 per cent stake of its enlarged share capital after the listing.
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