HONG KONG: Developer China Vanke’s property services arm has launched Hong Kong’s largest initial public offering (IPO) of 2022, aiming to raise up to US$783.5 million in a deal that will be a key test for investor appetite.
The subsidiary, Onewo Space-Tech Service, has set a price range of HK$47.1 to HK$52.7 a piece in the public offering of 116.74 million of its shares, which represents 10 per cent of the company’s share capital, according to a deal term sheet.
The price range values Onewo at US$7 billion to US$7.8 billion.
Vanke, which is China’s second-largest property developer by sales and is listed both in Shenzhen and Hong Kong, owns 62.9 per cent of Onewo and is its biggest customer, regulatory filings showed.
The deal is likely to reveal how much appetite investors have for buying into the services and management sub-sector associated with China’s cash-squeezed real estate market, which has lurched from one crisis to another over the past year.
While a string of Chinese developers have defaulted on offshore debt in that time, Vanke has weathered the crisis better than its rivals, thanks in part to carrying less debt relative to its equity and having partial state ownership.
Once Onewo’s shares debut on the Hong Kong stock exchange, their performance is also likely to influence the prospects of other property services companies looking to raise capital through public offerings.
The Hang Seng property services and management index is down 44.3 per cent so far this year, reflecting ongoing weakness in the real estate sector.
Some services companies have scrambled to lend money to their parent companies or raise funds for them. Investors have viewed such moves dimly.
In August, shares in property manager Jinke Smart Services Group dropped 37 per cent in one day after it said it would lend up to US$222.3 million to parent Jinke Property.
The Onewo IPO would not be directed at raising liquidity for Vanke, Yu Liang, chairman of the parent company, said on Aug 31. The subsidiary accounted for only 1 per cent to 2 per cent of Vanke’s assets and profits, Yu added.
Global financial market volatility led to Onewo’s IPO being scaled back from an initial ambition to raise up to US$2 billion, people with knowledge of the matter previously told Reuters.
Onewo said it planned to use funds from the IPO to expand its existing businesses, upgrade its software and take majority stakes in three to five “value added” service providers in its sector.
The IPO deal has participation from six cornerstone investors that have together subscribed for up to US$280 million worth of the shares, the filings showed. Among those investors are China’s Mixed Ownership Reform Fund, China Chengtong Investment and UBS Asset Management.
The IPO final price will be set on Sep 22; public trading of the shares is due to begin on Sep 29.
The deal also comes as a boost for the Hong Kong bourse.
Amid Sino-US tension and a tightening regulatory environment in China, companies have raised just US$2.42 billion in IPOs in Hong Kong so far in 2022, versus US$23.76 billion in the same period of 2021, Refinitiv data showed.
Onewo’s transaction will become Hong Kong’s largest IPO of 2022, eclipsing that of Huitongda Network, which raised US$297 million in February.
The two largest equity deals in Hong Kong this year – China Tourism Duty Free’s US$2.1 billion share sale and one by Tianqi Lithium’s worth US$1.7 billion – were secondary listings. Both firms were already listed in China.