* Magnum shares more than double in hectic trading
* IPO breaks record for retail demand in Hong Kong
* Deal shows retail crowd set to fuel strong IPO year
By Elzio Barreto
HONG KONG, Jan 23 Hong Kong's mom and pop
investors piled into night clubs on Thursday, driving shares in
debutant Magnum Entertainment Group Holdings Ltd to
more than double the offer price for a business rooted in
mirrorballs and cocktails.
In intense trading, Magnum's stock surged as high as HK$3.21
on its opening day, compared with its initial public offering
price of HK$1.50. The retail tranche of the IPO was
oversubscribed more than 3,500 times, a new record and a
reminder of the fervor of retail investors in a market that's
set for its biggest IPO year since 2010.
Shares in the group, which manages three night clubs near
Hong Kong's financial district, were changing hands for HK$2.88
in afternoon trading. Magnum raised HK$126 million ($16.2
million) in the IPO and will spend proceeds on opening a new
club in Hong Kong - and possibly expanding into mainland China
and Southeast Asia.
The listing enjoyed a high profile in the city - the
prospectus came with a cover showing lavish club settings - and
typified the kind of offer that reels in the army of retail
investors who fuel Hong Kong's biggest IPOs.
The previous record for IPO demand by volume of applications
was set in 2011 when Milan Station Holdings Ltd, which
sells used designer handbags, went public with an
oversubscription rate of 2,100 times.
Milan Station surged 65 percent in its own first-day trading
pop, but has fallen away since. The company, which issued a loss
warning last December citing a slowdown in the luxury handbag
market, was trading 43 percent below its IPO price on Thursday.
Magnum will hope to avoid that fate, boasting a whopping
gross profit margin of around 80 percent in recent years,
fortified by sales of expensive drinks.
It plans to use about half of the IPO proceeds to open its
fourth club, called Zentral, in 2014, according to the
prospectus. A further 20 percent of proceeds will be set aside
for marketing, and 20 percent will go to research expansion
plans into mainland China and Southeast Asia.
Magnum is controlled by 61-year-old Yip Mow Lum, who went
from trading textile quotas in Hong Kong to become the owner of
local brokerage Bright Smart Securities and Commodities Group
The company opened its first venue, called Beijing Club, in
2007 and a second, Billion Club, a year later.
Magnum Club became the group's third and largest venue in
2011, its glitzy interior decorated in crystal and a mosaic of
mirrors. The club targets wealthy patrons from native Hong Kong
and expatriate communities, as well as mainland China, with Moet
& Chandon champagne and Belvedere vodka.
BOCOM International Securities, the international investment
banking arm of Bank of Communications Co. Ltd
, was sole global coordinator and sole
bookrunner of the IPO. Anglo Chinese Corporate Finance was sole
sponsor of the deal, while Kingston Securities was also joint
The banks stand to earn $1.6 million fees for managing the
IPO, equivalent to a 3.3 percent underwriting commission and up
to 6.7 percent in incentive fees to BOCOM International. The 10
percent in total fees is high, compared with an average of 2.5
percent-3 percent for a typical new Hong Kong listing.
($1 = 7.7579 Hong Kong dollars)
(Reporting by Elzio Barreto; Editing by Kenneth Maxwell)