Slumping stock markets are threatening to disrupt as much as $10 billion of initial public offerings across Asia, as companies from Suntory Holdings Ltd. to Macau Legend Development Ltd. prepare listings.
Companies are gauging demand or taking orders for as much as $2.5 billion of IPOs in Southeast Asia and $2.3 billion of deals in Hong Kong, according to data compiled by Bloomberg. Suntory is seeking to raise as much as $4.7 billion this month in Japan’s largest first-time share sale since September.
With Asia’s benchmark stock index wiping out the year’s gains, some companies marketing IPOs may be forced to accept lower valuations or delay listings. Hopewell Hong Kong Properties Ltd. scrapped a $780 million offering in the city yesterday while China Harmony Auto Holding Ltd. plunged 16 percent in the worst Hong Kong debut since February 2012.
“We are going to need some stability in the market to get a lot of the pipeline done,” said Stuart Mackay, head of equity capital markets for Southeast Asia at UBS AG, in a June 10 interview. “It gets tougher to do deals with the markets moving around like they have for the last two weeks.”
The MSCI Asia Pacific Index is down almost 10 percent from a May 20 high, meeting some investors’ definition of a correction, while Japan’s stock benchmark has fallen more than 20 percent from recent highs. Gyrating markets are putting an IPO recovery in Asia at risk. Until now, companies raised $19.3 billion in the region this year, up 17 percent from the same period last year, data compiled by Bloomberg show.
The biggest deal under way is the sale of Suntory’s non-alcoholic beverage business, set to be priced on June 24. The company, Japan’s second-largest drinks maker, will set a price range for the IPO on Monday. Suntory has set a tentative price of 3,800 yen, according to a May 29 filing.
“Suntory will have to lower the price, and it will carry out the listing,” said Kazumi Tanaka, an IPO analyst at DZH Financial Research Inc.
Suntory isn’t considering delaying or scrapping the IPO of Suntory Beverage & Food, said Tazuko Ikeda, a spokeswoman for the unit.
Hopewell Hong Kong Properties, the owner of buildings including Hopewell Centre in Hong Kong’s Wan Chai business area, was the city’s biggest casualty of an equities selloff since May 2012, when Graff Diamonds Corp. dropped plans for a $1 billion IPO amid slumping markets.
The company, a unit of Gordon Wu’s Hopewell Holdings, cited “significant deterioration in market sentiment” and “volatile market conditions” as reasons for pulling the deal.
CAA Resources Ltd., an iron-ore producer in Malaysia, postponed its $80 million IPO in Hong Kong yesterday, according to an external spokeswoman for the company.
Others are pushing ahead. Nexteer Automotive Corp., the U.S. auto-parts maker controlled by China’s biggest aerospace company, started taking orders today for a $325 million IPO in Hong Kong, according to a term sheet for the deal. The company plans to start trading on July 3, the terms show.
Macau Legend Development Ltd., the casino operator backed by former Macau lawmaker David Chow, is proceeding with a sale that may raise as much as $788 million, people familiar with the matter said. New World Development Co., the Hong Kong builder controlled by billionaire Cheng Yu-tung, is also pushing ahead with a $700 million IPO of its local hotels, people with knowledge of the deal said yesterday. Both companies aim to complete the deals this month.
New World Development is gauging investor demand for its stock and will set a price range on Monday, the people said, asking not to be identified as the information is private. Macau Legend is taking orders for shares at a range of HK$2.30 to HK$2.98 apiece, according to a sale document obtained by Bloomberg News.
Philippine Casino operator Travellers International, which operates Resorts World Manila, started gauging investor demand for an IPO yesterday, according to a term sheet obtained by Bloomberg. The company, a venture of Alliance Global Group Inc. and Genting Hong Kong Ltd., is seeking as much as 34.8 billion pesos ($806 million) from the offering in Manila, according to a regulatory filing last month.
Also in Southeast Asia, budget carriers AirAsia X Bhd. and Nok Airlines Co. both said this week that they will sell shares to fund expansion plans. AirAsia X, the long-haul arm of Asia’s biggest budget carrier AirAsia Bhd., plans to raise as much as $370 million, while Nok Air, a budget carrier controlled by Thai Airways International Pcl, is seeking about $106 million.
In Singapore, OUE Hospitality Trust is seeking as much as $709 million, according to a term sheet obtained by Bloomberg News on June 10.
Some companies in the region may choose to delay sales rather than accept lower valuations, said David Gaud, senior portfolio manager at Edmond de Rothschild Asset Management.
While short-term market swings may complicate companies’ IPO plans, Southeast Asia’s economic growth prospects will continue to draw investors to deals, said UBS’s Mackay. Rising consumer spending and investment in countries including the Philippines and Thailand have spurred expansion there even as China’s economy cooled.
“You see a medium term story that’s still intact,” Mackay said. “The pipeline continues to build, continues to be decent.”