- Title: CHINA: Shampoo maker BaWang soars 35 percent in Hong Kong IPO
- Date: 4th July 2009
- Summary: CHINA, HONG KONG (JULY 3, 2009) (REUTERS) FULBRIGHT SECURITIES GENERAL MANAGER, FRANCIS LUN TALKING ON THE PHONE (SOUNDBITE) (English) FULBRIGHT SECURITIES GENERAL MANAGER, FRANCIS LUN, SAYING: "Basically they invest in a company and then baby-sit it to grow better so that their profit performance is at its peak just before listing. And then they sell the stock and cash
- Embargoed: 19th July 2009 13:00
- Keywords:
- Location: China
- Country: China
- Topics: Industry
- Reuters ID: LVA2H05M3U8KUACN83MQWRQUZS1F
- Story Text: Chinese herbal shampoo maker, BaWang, sold 700 million shares in its Hong Kong debut, making it one of the most popular IPO's this year.
Shares in Chinese herbal shampoo maker BaWang International (Group) Holding Ltd soared more than a third in its market debut on Friday (July 3), bucking a weaker broader market, in a sign of strong demand for consumer goods stocks.
BaWang, which hired movie star Jackie Chan and pop singer Faye Wong to promote its products, sold 700 million shares at a price representing 18 times its estimated earnings for 2009.
The stock rose as high as HK$3.20 per share after opening at HK$2.95, compared with its initial public offering price of HK$2.38 with 773 million shares changing hand.
The IPO is the most popular in Hong Kong so far this year in terms of subscription among retail investors and analysts say the strong response could be a sign of a pick up in appetite for new listings.
BaWang's retail public offering portion was 446 times subscribed and the company priced its HK$1.67 billion ($213.6 million) IPO at the top end of the indicative range.
Chairman, Chen Qiyuan, said he was delighted with the response and is confident looking forward.
"Under the economic development in China, people will continue to pursue healthier and more natural lifestyle. Thus, I believe under the trend, we will have more room for further development," said Chen.
The company, which started as a humble husband and wife team in the southern city of Guangzhou 15 years ago, is now looking to expand into China.
"Within the whole Chinese herbal hair shampoo market of China, BaWang is definitely the market leader. Yet, for the leader's position, we have got only about 46% of the market share. Although the figure is big as you see, the problem is that Bawang actually has only 7.6 % in the whole hair shampoo and that's really small," added Chen.
Fulbright Securities analyst, Francis Lun, said BaWang's meteoric rise in popularity had a lot to do with clever marketing.
But he said it had little to do with endorsements by Jackie Chan, whose popularity in Hong Kong has plummeted after recent unpopular comments in the press.
Lun suggested BaWang's success had more to do with the deal's management by HSBC and Morgan Stanley, and called the IPO another example of an 'engineered listing' by investment banks.
"Basically they invest in a company and then baby-sit it to grow better so that their profit performance is at its peak just before listing and then they sell the stock and cash out several times their original investment. These are basically engineered, manufactured, listed companies, and I don't like them frankly," Lun said.
The herbal shampoo company now has a market value of around $1 billion U.S. dollar.
"Pretty big for a mom and pop store, 15 years ago. So they've come a long way. The husband and wife team basically were village entrepreneurs from Guangdong. So they managed to hit the big-time, congratulations to them," Lun added.
Demand for IPOs has heated up recently, especially for consumer goods-related companies on the mainland betting they will benefit as China's economy looks set to be among the first to recover from a global downturn. - Copyright Holder: REUTERS
- Copyright Notice: (c) Copyright Thomson Reuters 2011. Open For Restrictions - http://about.reuters.com/fulllegal.asp
- Usage Terms/Restrictions: None