Can Hong Kong's IPO market bounce back after months of intense protests?
Budweiser Brewing Company APAC, the Asia Pacific arm of Anheuser-Busch InBev, has revived the initial public offering (IPO) on the Hong Kong stock exchange put on hold in July due to concerns about pricing. The offering is set to go into bookbuilding this Wednesday with pricing circled for September 23 followed by a full listing on September 30.
The re-emergence of the IPO comes amid ongoing but diminished street protests in the former British colony ignited by a proposed law that would allow the extradition of criminal suspects from Hong Kong to mainland China.
The extradition bill's withdrawal on September 4 prompted a 1,000-point surge in Hong Kong’s Hang Seng index. If a window now exists for a successful IPO, it is thanks to the more than 6% gain achieved by the index since that date.
Investors balked at the valuation of the company back in July in what was supposed to be a $9.8 billion flotation with the ultra-aggressive projected price earnings ratio of 28.5-33.5 and valuation of between $54 billion and $64 billion. Since the IPO's withdrawal, parent AB InBev cleaned up its balance sheet with the sale of its Australian operations to Japan’s Asahi Group for $11 billion which was used to pay down its considerable debt burden.
Following the disposal, Budweiser Brewing Co. APAC looks like a more exciting proposition given that the inclusion of the Australian business proved to be a drag on consolidated earnings growth. A more realistic valuation of $45 billion has been put on the company.
A successful flotation of Budweiser’s Asian business—being handled by JP Morgan and Morgan Stanley—would provide a much-needed shot in the arm for Hong Kong’s IPO market, which has been weighed down by the inauspicious optics of the protests and raised fears that the city might lose its status as one of Asia’s pre-eminent financial centers.
The trade spat between China and the US has not helped the sense of malaise. Listings in Hong Kong are down more than 50% so far this year compared to the same period last year as investor sentiment has turned profoundly negative.
If Budweiser manages to successfully ink the IPO, it will confirm that an issuance window exists and prompt other trades into the market. Home Credit, a European finance company, and China’s Bank of Guizhou are lining up IPOs on the Hong Kong bourse which could collectively raise up to $ 1 billion and which are tentatively slated for book opening next month.