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. Read the rest of this entry »
Gambling Firms Aim to Raise Funds for Macau, Overseas Casino Operations
HONG KONG— For WSJ, Kate O’Keeffe & Yvonne Lee report: China’s international financial hub, located a quick ferry ride from the world’s casino capital, has seen a throng of gambling companies rush to its equity markets over the past year.
“The Asia gaming industry should be one of the fastest-growing sectors in the next decade.”
— CLSA analyst Aaron Fischer
Since July 2013, at least six casino and VIP gambling companies have unveiled plans to list in Hong Kong, often through so-called backdoor listings. These companies are either hoping to raise funds to expand abroad or to bolster business at home in Macau at a time when the enclave’s $45 billion gambling market is suffering its first revenue declines in five years.
Most recently, Nasdaq-listed Iao Kun Group Holdings Co. last month filed a formal listing application to go public “by introduction,” where no new funds are raised, hiring Rothschild (Hong Kong) Ltd. as its sponsor. The company is part of Macau’s junket industry, which brings high-spending gamblers from mainland China to Macau, issues them credit and collects players’ debts in exchange for commissions from casinos. Read the rest of this entry »