Poor debut for Li Ka-shing's port IPO bodes ill for new listings

SINGAPORE Fri Mar 18, 2011 10:17am EDT

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SINGAPORE (Reuters) - Hong Kong billionaire Li Ka-shing's Hutchison Port Holdings Trust's (HPHT.SI) units fell as much as 6.9 percent on their Singapore debut on Friday, underscoring how the tide has turned for new listings, with several deals already being delayed or scrapped.

The slump in Hutchison Port's shares comes as investors, reeling from the effects of Japan's earthquake and nuclear crisis, fled stock markets in Asia and Europe, prompting companies from Hong Kong to Singapore and Denmark to delay IPOs or price them lower than initially expected.

Denmark's ISS ISSHOI.UL, which provides cleaning and cooking services, pulled its planned $2.8 billion initial public offering on Thursday, joining a host of recent high-profile withdrawals, including Perennial China Retail Trust's S$1.1 billion Singapore IPO.

The market turmoil also casts a shadow on the listing of commodities giant Glencore International Ltd's GLEN.UL float, which some had expected would happen by mid-May.

"With markets where they are, it's a matter of picking the windows. It is going to be very volatile, until the nuclear situation is resolved," said a Hong Kong-based investment banker, who earlier this week priced a separate Asian IPO.

The Straits Times Index .FTSTI has fallen about 4.5 percent since a massive earthquake struck Japan a week ago, while Asian shares outside Japan .MIAPJ0000PUS lost 3 percent.

Hutchison Port closed at 95 cents, below its IPO price of $1.01, in total volume of 616.8 million units. The units had fallen as low as $0.94.

Traders and analysts had expected the fall, given the IPO was priced before Japan was struck by a massive earthquake last week, unleashing a destructive tsunami and damaging a large nuclear power generating complex.

"I wouldn't blow this out of proportion, bearing in mind that the IPO comes on stream at a time of extraordinary and exceptional market volatility," said Stephen Davies, CEO of Javelin Wealth Management, a financial advisory firm.

"Once markets begin to calm down and become a bit more reflective you'll see people pricing existing shares and also new issues more sensibly and with good reason," he added.

Hutchison Port's chairman Canning Fok remained optimistic about the company's prospects despite the weak debut.

"I think considering the situation, this is excellent...We got excellent support during the roadshow, so I am very positive about the whole thing," he said.

SOUTHEAST ASIA'S BIGGEST IPO

Hutchison Port, a unit of Hutchison Whampoa (0013.HK) raised $5.5 billion, making it the largest initial public offering in Southeast Asia and the biggest in Asia so far this year.

The trust, which owns and operates ports in Shenzhen and Hong Kong, is hoping to tap into a recovery in global trade and provide investors exposure to China's booming infrastructure business.

"Anything below its offer price is a buying opportunity. It's a good defensive stock to own, which gives exposure to growing Asian trade, and the yield is quite attractive," said Kevin Scully, managing director at NRA Capital.

The IPO, which takes the form of a business trust, had attracted cornerstone investors including Singapore state investment firm Temasek TEM.UL, U.S. hedge fund manager Paulson & Co and fund company Capital Research and Management.

Based on the latest price, Hutchison Port now offers investors a yield of around 6.2 percent, compared with 5.8 percent based on the offer price of $1.01.

The size of the Hutchison Port offering exceeds Petronas Chemicals' (PCGB.KL) $4.1 billion fundraising last year, which was the biggest ever IPO in Southeast Asia at that time.

DBS (DBSM.SI), Deutsche Bank (DBKGn.DE) and Goldman Sachs (GS.N) are joint bookrunners and issue managers for the offering. JPMorgan (JPM.N), UBS UBSN.VX, Barclays (BARC.L), Morgan Stanley (MS.N) are among co-lead managers.

(Additional reporting by Saeed Azhar and Eveline Danubrata in Singapore, Elzio Barreto and Denny Thomas in Hong Kong; Editing by Kevin Lim and Muralikumar Anantharaman)

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