China state money puts wind in Ferretti IPO sails

Luxury boats are seen during the Monaco Yacht Show, one of the most prestigious pleasure boat shows in the world, highlighting hundreds of yachts for the luxury yachting industry in port of Monaco, September 22, 2021. REUTERS/Eric Gaillard

HONG KONG, March 31 (Reuters Breakingviews) - The answer to Ferretti (9638.HK) Chief Executive Alberto Galassi’s baffling confidence in its Hong Kong share sale lies in the South China Sea. The yacht maker is going public on Thursday despite seemingly ever worsening choppy waters: Western sanctions are hitting boat-loving Russian oligarchs; President Xi Jinping’s “common prosperity” drive has prompted the country’s own super-rich to lay low; and new Covid-19 outbreaks are depressing Chinese consumer spending and delaying initial public offerings. read more

But China's palm-tree-laden island province of Hainan is coming aboard. It’s the ultimate owner of entities buying a large chunk of the 70% of Ferretti’s IPO going to cornerstone investors. On Friday authorities there passed new rules to promote the yacht industry, part of their aim to boost tourism and pivot away from real estate.

Ferretti priced its IPO on the lower end of the range, valuing it marginally higher than rival Sanlorenzo’s (SNL.MI) 10 times adjusted EBITDA multiple for the next 12 months. Hainan officials will be hoping it’s a seaworthy financial vessel. (By Yawen Chen)

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(The author is a Reuters Breakingviews columnist. The opinions expressed are their own.)

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