HPH Trust – BT

HPH Trust prices its S’pore IPO at US$1.01 per unit: sources

HONG Kong billionaire Li Ka-Shing’s Hutchison Port Holdings Trust priced its Singapore IPO at US$1.01 per unit, in the middle of a US$0.99-US$1.03 indicated range which itself was tightened from a wider range on Thursday, three sources with direct knowledge of the deal told Reuters.

The offering will raise US$5.4 billion in total, in what will still be South-east Asia’s largest stock offer.

The IPO was earlier expected to raise US$5.8 billion on an indicated price range of US$0.91 to US$1.08 a unit.

The sources declined to be identified because the final price has not been made public, while the company and banks involved in the deal were not available to comment.

The IPO, which takes the form of a business trust, had attracted cornerstone investors including Singapore investment company Temasek Holdings, US hedge fund manager Paulson & Co and fund manager Capital Research and Management, which had committed to pour in US$1.6 billion in the deal.

Despite the strong interest, the IPO did not meet the initial pricing expectation, reflecting investors’ anxiety about financial markets due to political turmoil in the Middle East and rising inflationary pressures.

That raises concern about upcoming multi-billion dollar IPOs in Asia, led by commodity trading firm Glencore’s listing in Hong Kong and Mapletree Commercial Trust’s S$1 billion deal in Singapore. ‘There is a pipeline of deals, but investors remain somewhat mixed at the moment,’ said John Woods, Asian strategist at Citigroup Private bank in Hong Kong.

Hutchison Port Holdings, a unit of Mr Li’s Hutchison Whampoa, owns and operates ports in Shenzhen and Hong Kong and is aiming to cash in on a recovery in global trade and provide investors with access to China’s booming infrastructure business.

Mr Li, Hong Kong’s richest tycoon, chose Singapore because of more favourable tax treatment for trust-like structures. A business trust is any grouping of assets that usually offers a steady stream of dividends and appeal largely to more conservative investors who want to diversify from bonds.

‘This will be a significant boost to Singapore’s efforts to compete with the likes of Hong Kong and Shanghai as a leading financial centre in Asia,’ said Jake Robson, a partner at law firm Norton Rose in Singapore who specialises in equity capital markets.

The Hutchison ports listing is the first large-scale launch of a business trust by a non-Singaporean business and the amount of money that will come in will exceed the total US$2.9 billion raised through IPOs in Singapore for the whole of last year, according to Thomson Reuters data.

‘The price probably reflects the greater volatility and uncertainty in the markets. It’s a very large IPO so to get it at the high end of the price range would have been tough,’ said Kevin Scully, managing director at NRA Capital.

‘Even at US$1.01, the yield is quite attractive for medium-term investors as long as China and Asian economies remain buoyant,’ he added.

A source involved in the deal told Reuters the yield is about 5.8 per cent, based on the US$1.01 price. This compares with a yield of around 7 per cent offered by many Singapore-listed business and property trusts.

The size of the Hutchison ports offering exceeds Petronas Chemicals’ US$4.1 billion fund-raising last year, which was the biggest IPO in South-east Asia at that time.

Hutchison Whampoa’s ports subsidiary and Singapore’s PSA could jointly own as much as 38 per cent of the company after the IPO.

The listing is positive for SGX, which is currently in a bid to acquire Australian stock exchange operator ASX in a US$7.7 billion deal, as it could potentially attract more business trusts and ports-related entities to list in the city-state, Credit Suisse head of Singapore research Sean Quek said.

The continued strong interest in the Hutchison ports IPO contrasts with the diminishing appetite for new issues, which has delayed a planned S$1.1 billion Singapore IPO by Perennial China Retail Trust, a trust managed by former CapitaLand shopping mall chief Pua Seck Guan.

DBS, Deutsche Bank and Goldman Sachs are joint bookrunners and issue managers for the offering.

JPMorgan, UBS, Barclays, Morgan Stanley are among co-lead managers. — Reuters