Bottom line: New IPOs from metals trading specialist Yintech in New York and aircraft leaser BOC Aviation will meet with lukewarm reception that sees them price in the middle of their range and post flat trading debuts.
A couple of IPO stories are in the headlines, including the first major offering of a Chinese company in New York this year set to take place by metals exchange operator Yintech. Meantime in Hong Kong, the airline leasing unit connected to Bank of China (HKEx: 3988; Shanghai: 601398) is also sniffing for interest in its plan for an offering to raise up to $1.5 billion.
Each of these IPO stories is quite different, in terms of size, industry and stage of development. But a common theme is that both come from relatively traditional older industries in China, rather than the high-growth tech and media sectors that more typically like to list offshore. To the contrary, this year has seen many of those high-growth companies like Qihoo (NYSE: QIHU) and E-House (NYSE: EJ) de-list from New York after failing to attract enough interest from US investors.
We’ll begin this IPO round-up with Yintech, a metals exchange operator in the process of pricing an IPO expected to launch later this week. Yintech is selling a relatively modest 7.5 million American Depositary Shares (ADSs) in the offering on the Nasdaq, and has set a price range of $12.50 to $14.50, meaning it could raise a relatively sizable amount of just over $100 million. (English article)
The company looks relatively unique, as it operates the largest online platform for people who like to spot trade in precious metals like gold and silver. But its revenue growth was somewhat disappointing for such a specialized company, rising just 7.6 percent last year to 1.25 billion yuan last year ($200 million). In a somewhat worrisome sign, Yintech’s profit actually fell 16 percent last year to 403 million yuan.
Of course, last year was a rocky year for Chinese stock markets, which soared in the first half of the year, only to tumble in the second half. That sell-off probably affected trading sentiment across all financial markets, which could explain the anemic revenue growth and profit declines for Yintech. Still, this particular offering doesn’t look particularly exciting, and I expect it will probably price in the middle to lower end of its range and post a flat trading debut.
BOC Aviation IPO Takes Off
Next there’s the IPO for BOC Aviation, which comes a month after Bank of China first announced it was spinning off the unit for a separate listing. (previous post) I commented at the time that Bank of China was probably making the move to raise cash to boost its own balance sheet, which is being undermined by a growing bad debt crisis in China.
Now the latest reports say BOC Aviation, which is Asia’s largest aircraft leasing company by asset value, has begun gauging demand for an offering that could come as soon as next month. (English article) The reports say the deal, being underwritten by Goldman Sachs, will start taking orders in the middle of May and could debut by the end of the month, with the previously mentioned target of raising up to $1.5 billion.
The company is posting reasonably strong growth, with revenue and profits both up about 10 percent last year to $109 billion and $343 million, respectively. Still, it does seem like the growth rates should be even higher, considering the explosive growth now taking place in a Chinese aviation sector where BOC Aviation should enjoy strong advantages.
All that said, we can probably expect a similar result for this particular offering as the one for YIntech, namely lukewarm demand that results in a pricing in the middle of its range and flat trading debut. At the end of the day these offerings from more mature sectors are probably quite typical for what we’ll see for the rest of the year for offshore IPOs, and anyone hoping for higher-growth names from emerging sectors will probably be disappointed.
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