Source: Broker China
Author: Wang Rui

Although it is a secondary listing, the Midea Group's current Hong Kong stock IPO is expected to raise no less than HK$25 billion, and the maximum is expected to exceed HK$35 billion. Following the listing of JD Logistics in May 2021, this is the largest IPO raised by Hong Kong stocks in more than three years. According to the schedule, Midea Group is expected to be listed on the Hong Kong Stock Exchange on September 17, the day of the Mid-Autumn Festival.

Midea Group's international sales account for about 95% of the current public offering. A Chinese reporter from the brokerage firm sought evidence that this portion was fully subscribed on the first day and ended one day earlier than the original plan, showing that it is very popular among institutional investors. At the same time, Midea also introduced 18 “luxury” cornerstone investors, including COSCO Offshore Holdings, Boyu Capital, and UBS Asset Management, with a total subscription rate of 37.25%.

Enthusiasm for online subscription is lacking

At 12 noon on September 12, the subscription for the Midea Group Hong Kong stock public sale section ended. According to data from Jieli Trading Bank, the Midea Group margin subscription ratio this time was only 3.25 times. In contrast, out of the 44 companies newly listed on the Hong Kong stock market this year, only 8 had an online subscription ratio of less than 3.5 times.

Judging from the news, Midea Group's current public sale is not progressing fast. It wasn't until the afternoon of September 11 that it was fully subscribed, which took more than two days. On the morning of September 12, the margin sale once drew HK$1.49 million, and eventually ended at HK$4.383 billion, oversubscribing by 2.25 times.

Looking at brokerage groups, Midea Group's margin subscription amount this time totaled HK$4.383 billion, of which Phillip Securities and Futu Securities together totaled HK$4.261 billion, taking over 97% of the market share. Obviously, in Hong Kong stock margin financing, the leading effect is still significant, and the industry concentration is very high.

According to the estimate of the closing price of A-shares at 62.37 yuan/share on September 12, the current Hong Kong stock offering price of Midea Group is HK$52 to HK$54.80, which is equivalent to a 76% to 80% discount. “Although the overall asset performance was average in 2024, the enthusiasm of companies to go public in Hong Kong is not low. Currently, along with the cyclical ups and downs of the market, Hong Kong stocks still have a certain profit effect.” The Futu Investment Research Team said in an interview with a Chinese reporter from the brokerage firm.

According to the issue price estimate, the financing scale of Midea Group's Hong Kong stock listing this time is between HK$25.584 billion and HK$26.962 billion. According to the prospectus, 20% of the funds raised will be used for global R&D investment, 35% for continuous investment in intelligent manufacturing systems and supply chain management upgrades; 35% will be used to improve global distribution channels and sales networks, increase overseas sales of private brands, and 10% will be used for operating capital and general corporate purposes.

The meaning of Drunken Man is to go out to sea

Judging from the public sale situation, online investors are not very enthusiastic, but this does not seem to have had a significant impact on the Midea Group — the company plans to sell 0.492 billion H shares globally, of which the international sale accounts for about 95%, the Hong Kong public sale accounts for only about 5%, and the additional 15% over-allotment rights.

A Chinese brokerage reporter learned from the industry that Midea Group is quite popular in terms of international placement. The full subscription was achieved on the first day of sale, and the subscription ended one day earlier on September 11. Another source revealed that although the sale price per share announced by Midea Group is between HK$52 and HK$54.80, if the investor's subscription price does not reach the upper limit of the offer price, the subscription may fail.

In addition, Midea Group has also brought in a total of 18 cornerstone investors, including COSCO SHIPPING, Boyu Capital, UBS Asset Management, BYD, and the National Adjustment Fund. The lineup is quite luxurious. Moreover, the total subscription ratio of cornerstone investors was as high as 37.25%. According to the maximum prospectus price estimate, this portion of the subscription amount alone exceeds HK$10 billion.

“This H-share offering is expected to improve the efficiency of Midea's overseas business layout, strengthen the incentive mechanism for overseas employees, and further raise Midea Group's attention in the global capital market.” Li Yizhen, chief analyst of the home appliance industry at SDIC Securities, said that this move is expected to increase Midea's trading activity in global capital markets, and overseas financing will be more convenient.

Guan Quansen, an analyst at Guolian Securities, believes that as of the first half of this year, the Midea Group's monetary capital/transactional financial assets and other fixed income current assets totaled 144.9 billion yuan, so the significance of the H share listing is mostly beyond fund-raising. He said that this is an extension of the company's “global breakthrough” strategy, providing an operating platform for overseas equity incentives, mergers and acquisitions, improving overseas investment channels and capital structure, and introducing COSCO SHIPPING (Hong Kong) as a cornerstone investor to bind strategic overseas resources.

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