I don’t usually pay too much attention to the domestic Chinese IPO market, largely because most companies that list on the main boards in Shanghai and Shenzhen are stodgy state-run firms that aren’t open to foreign investment anyhow. But new reports that fast-rising real estate and entertainment star Wanda Group is planning 2 new offerings this year actually got me just slightly excited, especially as word buzzes that one of those will be for the company’s rapidly expanding China-based theater chain. While such an offering would almost inevitably come on one of the mainland-based stock exchanges, it would also probably attract huge attention from global investors if Wanda’s billionaire founder Wang Jianlin were to consider a dual listing in Hong Kong.
Word of Wanda’s IPO plans come from remarks made at the company’s annual meeting by Wang, one of China’s 2 or 3 richest men, depending on which list you believe. According to the reports, Wang says he’s aiming to list at least 2 of his group’s units later this year, though he wouldn’t be more specific. (English article) His proclamation immediately fueled speculation that the units up for listing would include Wanda’s fast-growing theater chain, as well as its lucrative commercial real estate business that operates a national chain of office buildings and shopping malls.
As a longtime China watcher, I can honestly say that Wanda is one of China’s most entrepreneurial major companies, despite its huge size. I’ve visited a number of its shopping malls in different Chinese cities, and all are very well run and maintained, and are usually full of shoppers and workers. That contrasts sharply with many of China’s other locally managed malls and office buildings, which often seem tired and old due to lack of good management, even though many were constructed within the last decade.
Wanda has risen rapidly on its ability to develop and run good commercial projects, including its fast-growing theater chain that is feasting on the meteoric rise of China’s box office. Recently released data show China’s box office grew by nearly a third to $3.6 billion in 2013, making it the second largest in the world behind only the US. Wanda operates one of China’s largest theater chains, generating 4.1 billion yuan ($670 million) in ticket sales last year on 1,247 screens.
Unlike many of its Chinese peers, Wanda has shown that it isn’t afraid to spend cash to maintain its cutting edge position on China’s theater stage. The company has entered into major long-term agreements with US theater technology giants Imax (NYSE: IMAX) and Dolby (NYSE: DLB), and last year purchased AMC Entertainment (NYSE: AMC), the second largest US theater chain. While spending lots of money certainly doesn’t guarantee success, failure to spend on leading edge technology is almost certain to guarantee failure.
All that brings us back to the original issue of what we’re likely to see from Wanda in terms of IPOs this year. Analysts point out that Wanda has been waiting to list its theater and commercial real estate units for a while now, but had to wait after China suspended all new IPOs in late 2012 to support the stock market. New IPOs recently resumed, which was almost certainly a factor behind Wang’s latest comments.
The timing of those comments, combined with details of Wanda’s previous IPO plans, make it look almost inevitable that the theater and commercial real estate businesses will make multibillion-dollar listings in either Shanghai or Shenzhen later this year. I suspect that one or both units will also make dual listings in Hong Kong, in a bid to raise Wanda’s profile as Wang seeks to take his company global. If and when that happens, look for strong demand for both offerings, as international investors look to grab a piece of a company that has the potential to become China’s first world-class real estate and entertainment firm.
Bottom line: Wanda’s commercial real estate and theater operations are likely to make separate IPOs this year, which could draw big global investor interest if the plan includes a dual float in Hong Kong.