UPDATE 1-Chinese auctioneer Poly Culture raises $331 mln in HK IPO
* Prices IPO at HK$33.00/share, top of marketing range
* Retail tranche 600 times oversubscribed
* Shares to debut in Hong Kong on March 6 (Adds Poly Culture's business, use of proceeds, underwriter, context)
HONG KONG, Feb 28 (Reuters) - Poly Culture Group Corp Ltd, China's largest art auctioneer, is set to raise $331 million after pricing its Hong Kong initial public offering (IPO) at the top of its marketing range thanks to strong demand for stocks in niche sectors.
The world's third-biggest auctioneer after runaway leaders Christie's and Sotheby's is following in the recent footsteps of a funeral services operator, cooking wine maker and night club owner, who received buying offers far in excess of the number of shares on sale.
Those three Chinese companies saw their share prices shoot up on listing because of buying by investors turning to unusual industries in search of growth.
Similar demand enabled Poly Culture to price its shares at the very top of a HK$28.20 to HK$33.00 indicative range, Thomson Reuters publication IFR reported on Friday citing people familiar with the IPO.
The auctioneer offered 70.7 million new shares and parent Poly Group - previously controlled by the military - offered 7.1 million shares, making the total sale worth HK$2.57 billion ($331 million).
The HK$33.00 price would therefore be equivalent to a 2014 price-to-earnings ratio of 17.1, IFR said, or 17.1 times the amount of profit the company could potentially allocate to each share in 2014.
Poly Culture's shares will be listed on the Hong Kong Stock Exchange on March 6.
CLSA was sole global coordinator and bookrunner, and stands to earn underwriting commission of $7.94 million, or 2.4 percent of the proceeds, according to the IPO prospectus.
The prospectus also showed that Poly Culture was once 32 percent owned by defence contractor Poly Technologies Inc, which was subjected to U.S. sanctions for conducting business with Iran, Syria and North Korea.
Poly Culture said its reputation could be affected by the connection. Still, the number of Poly Culture shares brokerages sought to sell on to individual investors was more than 600 times the number on offer, while the institutional book was "heavily oversubscribed," IFR reported.
By comparison, the retail tranche of funeral services operator Fu Shou Yuan International Group Ltd was oversubscribed by more than 681 times, cooking wine maker Honworld Group Ltd by 1,045 times, and night club owner Magnum Entertainment Group Holdings Ltd by 3,500 times.
Poly Culture is known primarily for being an auction house for art, but it also operates 31 theatres and 17 cinemas, and has an agreement to lease another 25 cinemas, according to the IPO prospectus.
The company earned net profit of 308.2 million yuan ($50.29 million) in the 10 months ended Oct. 31 compared with 316.7 million yuan in the same period a year earlier, on revenue of which rose 17.7 percent to 1.46 billion yuan.
Poly Culture brings in about 44 percent of revenue from auctioning art, 40 from managing theatres and 16 percent from managing cinemas.
The company plans to use half of the IPO proceeds to expand the art side of its business by, among other means, opening galleries worldwide.
About 40 percent of the proceeds will go toward its theatre and cinema businesses.
($1 = 7.7601 Hong Kong dollars)
($1 = 6.1284 Chinese yuan) (Reporting by Fiona Lau of IFR and Elzio Barreto; Editing by Christopher Cushing)