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Li’s ARA Cancels Dual-Currency IPO, Citing Sluggish Demand

Li Ka-shing, chairman of Cheung Kong (Holdings) Ltd. and Hutchison Whampoa Ltd. Photographer: Jerome Favre/Bloomberg
Li Ka-shing, chairman of Cheung Kong (Holdings) Ltd. and Hutchison Whampoa Ltd. Photographer: Jerome Favre/Bloomberg

Oct. 25 (Bloomberg) -- ARA Asset Management, the manager of property trusts backed by billionaire Li Ka-shing, canceled what would have been Singapore’s first dual-currency initial public offering amid sluggish demand for new equity.

ARA suspended the IPO of Dynasty Real Estate Investment Trust, which is backed by commercial real estate in China and was set to trade in both yuan and Singapore dollars, according to a stock exchange statement yesterday.

Dynasty’s forecast yield of as much as 7.1 percent wasn’t enough to sway investors deterred by Europe’s credit crisis and the poor performance of recent IPOs including Religare Health Trust and Astro Malaysia Holdings Bhd. Li’s Hui Xian Real Investment trust, which last year completed the first yuan IPO outside China, is down 22 percent from its offer price.

“I’m a bit surprised the IPO didn’t go through because right now, dividend-yield companies are experiencing quite a strong performance,” said Alan Richardson, who helps oversee about $82 billion for Samsung Asset Management. “In this current easy liquidity scenario, there is money around but investors want to make sure they are comfortable with what they are buying.”

At as much as 5.4 billion yuan ($864 million), Dynasty’s IPO would have been Singapore’s largest since Li’s Hutchison Port Holdings Trust raised $5.5 billion in March last year. ARA said yesterday it may consider a China-focused REIT later, and will continue to manage the properties in its private funds. Dynasty is backed by commercial properties in Shanghai, Nanjing and Dalian, according to the IPO prospectus.

IPO Drought

Singapore’s surging dollar may also have hurt the appeal of a yuan-denominated offering. The city-state’s currency has gained 6.2 percent against the U.S. dollar this year, the second-best performance among major currencies, data compiled by Bloomberg show.

IPOs have dwindled in Singapore and Hong Kong as turbulent global markets and Europe’s credit crisis weakened investor appetite for risk. In July, Reliance Communications Ltd. withdrew a $1 billion IPO of its undersea cable unit in Singapore, citing market conditions.

Astro Malaysia and Religare Health have fallen since completing IPOs in Kuala Lumpur and Singapore this month. Seven of this year’s 10 biggest first-time offerings in Hong Kong have been priced at the low end of price ranges marketed to investors, data compiled by Bloomberg show.

“There has been a marked change in investor sentiment given the recent after market performance of several IPOs and a gradual worsening of the overall market conditions,” ARA said in the statement.

ARA shares traded little changed at S$1.555 a 1:11 p.m. today in Singapore. The stock has risen 27 percent this year, outperforming the 15 percent gain in the benchmark Straits Times Index.

Standard Chartered Plc, DBS Group Holdings Ltd. and Macquarie Group Ltd. were managing the IPO.

To contact the reporter on this story: Joyce Koh in Singapore at jkoh38@bloomberg.net

To contact the editor responsible for this story: Philip Lagerkranser at lagerkranser@bloomberg.net

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