In mid-to-late November 2019, Hong Kong stocks continued to sprint to the global IPO fund-raising king. Looking back at the performance of new shares, APP of Zhitong Finance noticed that the recent listings of new shares were obviously unsatisfactory, and most of the issuance prices were set at the lower limit of the offering price, basically at the pace of "one listing, one break". In October, the upsurge of new shares in the speculation boom also gradually returned to rationality.
The pricing of new shares is conservative and the failure rate is high.
According to the statistics of Zhitong Financial APP, a total of 41 new shares were listed in Hong Kong between October and November 19, of which 21 were priced at the lower end of the price range, 4 at the lower-middle level, 4 at the middle level, only 4 at the upper-middle level, and the remaining 8 at the upper-middle level.
The IPO price of Hong Kong new shares is usually determined by inquiry, which is divided into two parts: first, the initial inquiry, and the lead underwriter determines the IPO price range according to the valuation of comparable companies in the market and the company's performance expectations. After the IPO price is determined, a roadshow promotion meeting will be held, and the offering price will be finally determined according to the feedback of investors, demand and demand price information during the roadshow.
In short, if the market expectation is high, the issue price will naturally be high, and if the market response is lukewarm, the issue price will be adjusted accordingly. In bad market conditions, most IPOs will choose to price in the lower range of the IPO price in order to get a good response from the market.
From the statistical data, there is no inevitable correlation between the pricing level and the rise and fall of the first day of listing, whether it is up or down also depends on the market mood. For example, the "IPO craze" spearheaded by Master Lu (03601) in mid-October "rose first to respect" on the first day of listing, regardless of the offering price and whether it was the main board or the gem, and most of it rose by more than 20 per cent.
Of course, this irrational rise is difficult to sustain for a long time. The most typical example is Huaying Construction (01582), which soared 178% within three minutes after listing, then narrowed down, closed up 15% on the first day, and then broke in less than a month. Master Lu, who did not break, but with an astonishing increase in the previous period, has obviously reined in a lot.
(master Lu market trend chart, screenshot source: Zhitong Finance)
The new shares listed in late October and November had a lot of bad luck, and even though most of them were priced in the lower price range, not a few of them broke on the first day of listing. for example, to more than a dozen new shares, such as China International (01871), Denghui International (01692), Lihua Holdings Group (01346) and so on. By the close of November 19, 16 of the 41 Hong Kong stocks listed since October had broken on the same day, and despite the recovery of the market in the past two days, 20 IPOs were still below their offering price.
In early November, there happened to be news from the market that the Hong Kong Securities Regulatory Commission suddenly came to inquire a number of securities firms, and the market speculated that it might be related to cracking down on the "besieging flight" of new shares. Zhitong Financial APP learned that a person familiar with the operation of the market revealed that the atmosphere in Hong Kong's new stock market improved some time ago, and some of the new shares that paved the way for "beer shell" one or two years ago began to move, hoping to complete the listing before the cost of listing increased next year.
It is hard to avoid breaking even if the subscription ratio is high.
In terms of subscription multiple, among the 41 new shares, Yasheng Pharmaceutical-B likes to mention the title of "subscription king of the year" with a subscription multiple as high as 751.99 times, with a success rate of only 9%. Subscriptions for middle-hand games (00302) and Silver City Life Services (01922) followed.
Generally speaking, the dark market of new shares with high subscription ratio and the first day of listing are likely to rise, but to China International (01871) and Denghui Holdings (01692), they break this rule and break on the day of listing, and investors who participate in playing new shares are still losing money.
The highest increase came from the gem.
Among the secondary IPOs listed in the past two months, the highest cumulative gain is Odema Motor (08418), which is now up more than 540 per cent. The company, an one-stop car after-sales service provider in Singapore, was listed on the gem on October 11. From 2016 to 2018, the revenue was Singapore $16.33 million, 18.64 million yuan and 17.98 million yuan respectively, and the net profit was 1.42 million Singapore dollars, 1.9 million yuan and-240000 yuan respectively. The company turned a profit due to the increase in passenger car parts and accessories sold to Burmese customers in the first three quarters of this year. Adima has a high capital-to-debt ratio and negative cash flow from operating activities and currently has a market capitalization of only HK $1.3 billion.
The rising trends of Xinji Shaxi (03603) and Yimei International Holdings (01870) are also very prominent. Among them, Xinji Shaxi, which runs the hotel supplies mall, has been on the rise in every transaction since its listing. According to Zhitong Financial APP, the company has three hotel supplies malls and two household goods malls in Guangzhou and Shenyang, with a total floor area of about 363000 square meters and a total rentable area of about 270000 square meters, with an average occupancy rate of 85.2 per cent. Over the past few years, the income and net profit of Xinjishaxi have maintained growth, but the net profit has been greatly affected by the change in the fair value of the company's investment property. The profit in the first four months of this year has dropped sharply, mainly related to the sharp decline in the fair value of investment property.
Differentiation of property stocks
The same property stocks, Xinyuan Services (01895) and Blu-ray Garbo Services (02606) have come out of a completely different market, with the former fluctuating lower or even broken after listing, while the latter has gone up all the way and is now up 43.38%.
According to Zhitong Financial APP, Blu-ray Garbo Service is the largest property management company in Sichuan, relying on the development of Blu-ray, the parent company listed on the A-share market. Blu-ray Garbo's service business has expanded rapidly over the past few years through natural growth and mergers and acquisitions. The compound annual growth rate of the construction area in the tube from 2016 to 2018 is 58.2%, and as of June 30, 2019, the construction area in the tube is 63.31 million square meters. The compound annual growth rates of income and net profit are 49.2% and 70.6% respectively, and the gross profit margin is higher than that of comparable companies in the same industry. The parent company is currently full of goods, and the planned construction area this year is at a relatively high level over the years, so the growth of Blu-ray Garbo service has a high degree of certainty.
Xinyuan service relies on Xinyuan Real Estate Group, but its property management does not come entirely from Xinyuan Real Estate Group, but is only a property jointly developed by Xinyuan Real Estate Group, and the main rights and interests belong to independent third parties. therefore, more than 80% of Xinyuan's service income comes from independent third parties, and its gross profit margin is therefore much lower than that of its peers. As of March 31, 2019, Xinyuan service has a managed area of 15.8 million square meters, less than 1/4 of Blu-ray Garbo service.
In addition to the new shares that have already been listed, there are many companies that have cancelled their listings in Hong Kong recently. For example, JS Global Life (01691) stopped IPO due to a variety of factors such as current market conditions, and Silicon Valley Paradise Gold (01342) also announced a postponement of its listing a few days ago. The most embarrassing thing is Wenling work tool (01379), which was suspended by regulators on the eve of listing, possibly because of insufficient public shareholding. Earlier, looking for steel net, and Huang China Pharmaceutical Technology, Aobao Group and other enterprises have also announced the postponement of IPO in Hong Kong.