Best Small-Cap Equity Deal
Tradelink Electronic Commerce HK$335 million IPO
Lead manager: DBS Asia Capital
Legal counsel: Simmons and Simmons, Deacons
We define small-cap equity deals as offerings below $100
million and this deal fits nicely into that space. In fact,
this is probably the smallest Hong Kong government privatization
we have ever given an award too.
Tradelink is an internet portal for facilitating customs
forms filed with the Hong Kong government. It is a very
stable business, but in order to foster competition in the
sector, the government decided to sell down its major stake
(other key shareholders include Swire and PCCW).
What makes the deal more interesting was its strategic
importance for the government. As is well known, the Hong
Kong government had made selling the Link Reit a priority
and this deal was an effective way to test the water in
the markets. Just like the Reit, the HK$335 million IPO
was marketed by DBS as a yield play - with a 7% dividend
yield - and hence was able to gauge demand for yield products,
particularly among retail investors at a time of rising
bank rates.
After the success of this deal, which saw 34.5% of the
company sold and was 144 times oversubscribed on the retail
tranche - the government could fairly conclude that yield
products were still enormously enticing and go forward with
Link with a good deal more confidence.
The deal was launched into a falling market in October.
But clearly, the yield story proved effective, since the
deal priced at the top end of the range at HK$1.25 and subsequently
traded up 7.2% on the first day of trading. Year to date
it is up 15.2%, which suggests an ideally priced deal.
This is all the more remarkable when you consider that
it priced at a time when seven other deals were pulled or
postponed, and most other deals launched at a similar time
all traded down on the first day (such as Kasen International,
Sincere Watch and Guangdong Nan Yue). And all that in spite
of going 'head-to-head' with China Construction Bank, and
the massive amounts of liquidity it was sucking up (the
deals priced on the same day).
All in all, this constitutes a small, but beautifully formed
deal.
(Extracted from FinanceAsia.com
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