China Developer Sets Biggest Hong Kong IPO Since September
Chinese Developer Readies Biggest Hong Kong IPO Since September
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(Bloomberg) -- A unit of Chinese developer Longfor Group Holdings Ltd. got the green light for the largest Hong Kong listing in seven months in what would be a measure of investor confidence in the troubled sector.
The property management subsidiary Longfor Intelligent Living Ltd. has won approval for an initial public offering that may raise around $1 billion, according to people familiar with the matter. At that size, it would the largest IPO in the financial hub since Dongguan Rural Commercial Bank Co.’s $1.2 billion deal in September.
It would be testing appetite for shares tied to China’s problematic real-estate industry, which has been roiled by multiple debt defaults and slumping new-home prices over the past few months. The IPO may also indicate a period of recovery in the market after extreme volatility because of the war in Ukraine and Beijing’s regulatory crackdown.
Longfor Intelligent hasn’t decided yet when to launch the IPO, deliberations are ongoing and details could still change, said the people, who asked not to be identified as the information is private.
If the company raises the expected amount, it would hint that there is demand for shares of some Chinese real estate firms and their units, as many of them remain shut from selling bonds at a time when the credit market has reached an inflection point. Policy promises in the middle of last month helped spark a rally for the valuation of Chinese real estate owners and developers, but that rebound has been fading in recent days.
In Hong Kong, IPO activity has been subdued so far this year, with the amount raised slumping 90% to $1.9 billion compared with the same period of 2021, and deals have been on the smaller side. The latest real-estate listing of more than $100 million was Jinmao Property Services Co. Its shares are down about 27% since their debut on March 10.
Still, Longfor Intelligent’s parent company has more solid credit metrics and stronger liquidity than peers, according to Moody’s Investors Service and Bloomberg Intelligence. Longfor Group’s 81% rebound in contracted sales in March from February may help its operations, including land acquisitions, BI analysts Daniel Fan and Adrian Sim wrote in a note.
Longfor Intelligent runs developments including residential communities and shopping malls across China, and has over 1,500 projects under management, according to a preliminary prospectus filed with the Hong Kong’s exchange. CCB International Holdings Ltd., China International Capital Corp., HSBC Holdings Plc and JPMorgan Chase & Co. are joint sponsors of the deal.
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