Top Hong Kong Stock? Umbrella MakerPosted: May 17, 2015
Hong Kong is having another umbrella moment.
First there was the umbrella movement last year when young people took to the streets to defy China’s plan for watered-down democracy. Now there is an umbrella maker that’s stunned the stock market.
“It is a bit crazy. The fundamentals do not justify the current stock price.”
— Hannah Li, strategist at UOB-Kay Hian
Jicheng Umbrella Holdings Ltd.1027.HK +13.29% is an unlikely title holder of Hong Kong’s best performing newly listed stock in 2015. At its initial public offering back in February, it received little interest with bankers pricing it at the low end of an indicated price range. But once it got trading it went through the roof, and at one stage last month it rose nearly 20-fold from its IPO price and is still up 14-fold as of Friday.
“It is a bit crazy,” said Hannah Li, strategist at UOB-Kay Hian. “The fundamentals do not justify the current stock price.”
The rally means the company is worth 9.1 billion Hong Kong dollars ($1.17 billion), and is trading at a price-earnings ratio of 100, far higher than the 11.2 for the average of stocks in the Hang Seng index.
Exactly why investors are so keen on an umbrella maker to give it a sky high valuation is puzzling, while its shareholder structure looks even more bizarre. The Securities and Futures Commission, Hong Kong’s market regulator, issued a warning Thursday to investors that just 17 shareholders hold over 99% of the company’s shares (the major shareholder owns 75% of the company). This means a buyer could easily push the stock up substantially as there’s so few owners of the shares.
Ms. Li said while Jicheng’s business is in good shape, the small number of shares held by public shareholders is a major reason for the rally.
Jicheng raised HK$165 million by selling 150 million shares in its IPO in February, yet only 10% of that, or 2.5% of total shares outstanding, were issued to the general public. The rest were sold by the underwriters to institutional, professional and “other” investors. The company confirmed at the time of the IPO that no one who bought shares in the placing were related to the company….(read more)
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