Hutchison Whampoa Ltd.’s sale of Chinese port assets may raise more than Singapore’s combined 31 initial public offerings last year, boosting the city’s efforts to compete as a financial center.
Hutchison, controlled by Hong Kong billionaire Li Ka-shing, said yesterday it will sell a stake in a trust holding container ports in Hong Kong, Macau and Guangdong province, along with associated businesses and some Chinese river ports. The sale may raise $6 billion, the IFR news service reported yesterday.
An offering of that size would be a record for the city- state, eclipsing the $4 billion raised by Singapore Telecommunications Ltd. in 1993. IPO proceeds in Singapore totaled $5.7 billion last year, trailing the $49.5 billion raised in Hong Kong, according to data compiled by Bloomberg that exclude overallotment shares.
“Given there’s so many companies listing in Hong Kong, you can say the Singapore Exchange won this time,” said Nicholas Yeo, who helps oversee Chinese equities at Aberdeen Asset Management, which manages $261 billion globally. “This is definitely a boost to the Singapore market.”
Singapore’s Straits Times Index gained 10 percent last year and 64 percent in 2009, outperforming Hong Kong’s Hang Seng Index, which rose 5.3 percent in 2010 and 52 percent the previous year, data compiled by Bloomberg show.
STX Group
Hutchison said it was listing the new port company in Singapore because Hong Kong Exchange regulations don’t allow such trusts. Hutchison may eventually offer units of the trust in its home city if regulations change, it said.
South Korea’s STX Group is considering listing its Chinese shipyard in Singapore or Hong Kong in the second half of this year. The group’s STX Pan Ocean Co. and STX OSV Holdings Ltd. are already traded in the city-state.
Singapore Exchange Ltd., the operator of the city’s securities market, offered in October to buy ASX Ltd., Australia’s main bourse, for A$8.4 billion ($8.4 billion) to help Singapore compete against regional rivals.
“Singapore Exchange’s planned takeover of ASX makes Singapore an attractive place for IPOs,” Lee Jong Chul, vice chairman of STX Group, said in an interview in October.
China Merchants Holdings (International) Co., the owner of stakes in ports that move a third of the country’s cargo containers, and Cosco Pacific Ltd., Asia’s third-largest container-terminal operator, both trade in Hong Kong.
Relative Value
Hong Kong Exchanges & Clearing Ltd., the operator of Hong Kong’s bourse, has a market capitalization of $25.6 billion and trades at 42.2 times profit, according to data compiled by Bloomberg. Singapore Exchange has a market value of $7.1 billion and a price-earnings ratio of at 29.9, the data show.
“If you list in Hong Kong then you will be competing for capital with China Merchants and Cosco Pacific,” said Johnson Leung, an analyst at Tufton Oceanic Far East Ltd. in Hong Kong. “If you list in Singapore there are no comparables.”
The ports in Hutchison’s trust posted an operating profit of HK$5.3 billion ($682 million) on sales of HK$10.3 billion in 2009, according to a statement. That’s an operating margin of 51 percent. The company had a 60 percent market share in Hong Kong’s Kwai Tsing port and a 47 percent share in Shenzhen in the same year, Hutchison said.
Hutchison will keep a stake of about 25 percent in the trust, Finance Director Frank Sixt said on a conference call yesterday. Singapore’s PSA International Pte will remain a large shareholder, he said. The management company for the new trust will be a fully owned unit of Hutchison, according to the statement.
‘Easy Fit’
Li Ka-shing is Hong Kong’s richest man, with a $24 billion fortune, according to Forbes. Hutchison also invests in real estate, mobile-phone services, infrastructure and drugstores.
“It’s really just a bonus for Singapore due to regulations,” said Gavin Parry, managing director of Hong Kong- based Parry International Trading Ltd. Singapore is also a big maritime country so this is an easy fit. The SGX and investors will feel comfortable with this listing.”
Singapore was the world’s busiest container port until it was overtaken by Shanghai last year.
Trusts pay dividends based on cash flow rather than earnings, meaning they offer a better combination of growth prospects and yield for investors, particularly given the nature of the asset, Sixt said.
“Using a business trust structure gives us an opportunity to offer new investors a much more attractive combination of current yield and growth than achieved through a typical corporate structure,” Sixt said.
Asian IPOs
Asian IPOs raised $282 billion, or 62 percent of the global total in 2010, the most of any region since at least 1998, according to data compiled by Bloomberg.
American International Group Inc.’s AIA Group Ltd. sold $20.5 billion of shares in Hong Kong, while India’s government raised 152 billion rupees ($3.4 billion) in the October offering of Coal India Ltd., making it the country’s biggest initial offering. Global Logistic Properties Ltd. raised $2.6 billion before exercising an overallotment option, in Singapore’s largest IPO last year, data compiled by Bloomberg show.
“These are signs that they are achieving their objectives to become a regional financial center, because of their ability to attract these big companies to come and list,” said Lee King Fuei, a Singapore-based fund manager at Schroders Plc, which held $234 billion as of September.
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