CHINA LITERATURE IN STELLAR DEBUT
Hong Kong investors embrace rush of tech listings
TENCENT’S e-book unit China Literature Ltd saw its shares double in their debut yesterday as Hong Kong investors embrace a rush of tech listings, with the stock on track to mark the biggest first-day pop for a large initial public offering (IPO) globally this year.
The company’s stunning debut has shown that Hong Kong has raised its game as it strives to compete with the New York and Nasdaq exchanges, which have been the more traditional home for Chinese tech IPOs seeking to attract international investors.
China Literature’s shares rose to as much as HK$110 (RM59.59) in early trade, compared with its offering price of HK$55 per share, giving it a market value of nearly US$13 billion (RM54.99 billion). The shares eased to HK$100 in early afternoon trade.
“As the first Tencent controlled subsidiary tapping capital markets, China Literature has to perform well in the secondary market to set a good example for other Tencent units,” said an institutional investor who took part in the IPO.
But while many investors cheered the stock on, others noted that yesterday’s valuations for the Tencent Holdings Ltd unit were stretched.
Company executives project net profit of 400 million yuan (RM253.8 million) this year and one billion yuan for next year, according to investors who attended IPO roadshow meetings.
That implies China Literature is trading at 201 times its forecast earnings this year and 80 times its projections for next year. By contrast, Tencent is trading at 51 times its forecast profits for this year.
Co-chief executive officer Liang Xiaodong said after the opening bell ceremony that the stock’s surge was a pleasant surprise.
“Going forward, we will conduct mergers and acquisitions and forge strategic alliances ...in a bid to stay ahead in our industry,” he said.