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Galaxy Securities Said to Weigh Valuation Below Top Rivals

Pedestrians walk past a branch of China Galaxy Securities Co. in Beijing. Source: Imaginechina
Pedestrians walk past a branch of China Galaxy Securities Co. in Beijing. Source: Imaginechina

May 2 (Bloomberg) -- China Galaxy Securities Co., seeking to entice investors to a $1.5 billion initial public offering in Hong Kong, may offer a lower valuation than those of competitors including Citic Securities Co., two people with knowledge of the matter said.

The Beijing-based brokerage, controlled by China’s sovereign wealth fund, is considering a price range that would value it at about 1.2 times estimated end-2013 book value, said the people, who asked not to be identified as the deliberations are private.

A slump in Hong Kong’s IPO market is putting pressure on Galaxy Securities and Sinopec Engineering Group Co. as they seek to complete they city’s first billion-dollar offerings since November. IPO proceeds fell to a four-year low of $1.1 billion in the first quarter, data compiled by Bloomberg show.

“Appetite is still there for solid names but investors are becoming more selective,” said Binay Chandgothia, a Hong Kong-based fund manager at Principal Global Investors, which oversees more than $280 billion.

Citic Securities, China’s biggest publicly listed brokerage, trades at 1.68 times estimated 2013 book value in Hong Kong, according to data compiled by Bloomberg. Haitong Securities Co., which raised HK$14.4 billion ($1.9 billion) in a share sale in April last year, carries a multiple of 1.35, the data show.

China Slowdown

Citic Securities shares have advanced 32 percent since its September 2011 stock sale in Hong Kong, which valued the brokerage at 1.28 times book value. Haitong is up 6.6 percent from its offer price. Both companies also have shares traded in mainland China.

Hong Kong’s Hang Seng Index is little changed this year as data from China signal a slowdown in the world’s second-largest economy, making the benchmark the second-worst performer among developed markets. The MSCI World Index has advanced 9.4 percent since Dec. 31.

Galaxy Securities plans to start taking orders for its IPO within two weeks, the people said. The company is trying to raise more than $700 million from so-called cornerstone investors, they said. Cornerstone investors typically agree to hold their stock for six months in return for guaranteed allocation in an IPO.

Founded in January 2007, Galaxy Securities is controlled by Central Huijin Investment Ltd., a unit of China Investment Corp., according to the brokerage’s website. An external spokeswoman for Galaxy Securities declined to comment on the targeted valuation and order-taking timing.

To contact the reporter on this story: Fox Hu in Hong Kong at fhu7@bloomberg.net

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

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