Bawang (霸王) Coming to Market

South China Morning Post: Bawang and Qinfa surge before debut

Bawang, one of the top four shampoo retailers on the mainland, climbed 28.99 per cent to HK$3.07 from an offer price of HK$2.38 in the unofficial market yesterday, while coal trading firm Qinfa rose 12.3 per cent to HK$2.83, compared with the offer price of HK$2.52.

With the Hang Seng Index just completing its best quarter in more than 15 years, increasingly bullish investors are looking for new opportunities.

Exactly right. This is a bull market phenomena fueled by a near complete reversal from fear to greed.

"I believe Bawang is going to have a better debut performance than newly listed sportswear maker 361 Degrees [International]," said Mr Shiba. "The IPO market is so hot."

Shares in 361 Degrees rose as much as 18.56 per cent from the offer price of HK$3.61 before closing 8.03 per cent up at HK$3.90 on their trading debut on Tuesday. The stock finished 6.92 per cent lower at HK$3.63 yesterday.

Bawang (霸王) closed lower, at HK$3.03, following a similar path to 361 Degrees. There appears to be a lot of buying interest, but not a lot of holding interest. As the speculative fever fades, the price declines. Not sure if I would buy either stock, but I think they'll both offer lower entry points.

BaWang 霸王 IPO

Shampoo maker cleans up

Seven brokerages polled by The Standard received margin financing orders of about HK$6.34 billion for BaWang as of yesterday.

The firm is seeking up to HK$1.67 billion in its initial public offering. At least HK$166.6 million is expected to come from local retail investors.

"The retail subscription for BaWang was much hotter than expected, backed by rosy share prices of newly listed companies," said Kingston Lin King- ham of Prudential Brokerage.

The strong response came after shares of China Metal Recycling (0773) surged as much as 29.5 percent yesterday on its trading debut.

It closed at HK$6.32, up 22 percent from its offer price of HK$5.18.

Hing Lee (HK) (0396), which also went public yesterday, soared 39.2 percent to close at HK$1.42 - the best debut performance so far this year.

BaWang's share price is expected to climb at least 20 percent on its first trading day on July 3, said Bright Smart Securities general manager Nelson Chan Kai-fung. Its share price will be set at HK$1.95 to HK$2.38.

BaWang's IPO may be oversubscribed up to 80 times because of strong market sentiment, sources said.

Another candidate, 361 Degrees International, closed its retail book yesterday and its retail tranche was more than nine times oversubscribed with brokers getting margin orders of HK$2.2 billion.

The sportswear brand aims to raise HK$2.18 billion by floating 500 million new shares at HK$3.15 to HK$4.35 each on June 30.

Don't you know there's a bull market going on?

361 Degrees IPO

JLM Pacific Epoch has the news:

The Hong Kong Exchange said the company plans to issue 500 million shares and public trading will commence on June 30. Of the HK$1.74 billion, 361 Degrees plans to use 39% on advertising and sponsorship, 32% for its Fujian factories and the remainder for research and development and operating capital.

The company has 5,900 retail outlets across 31 provinces in China, and plans to expand to 6900 by next June with 25 flagship stores. In addition, 361 Degrees plans to enter the children- clothing business in 2010 and expects to become profitable within one or two years, said the report.

My 361 Degrees sneakers have survived 5 years of wear and tear. Here's the company's homepage: 361 Degrees.

Chinese traditional medicine shampoo manufacturer, BaWang, is also set to IPO. From FinanceAsia:

Bawang's IPO consists of 700 million primary shares, or 25% of the company, which are offered at a price between HK$1.95 and HK$2.38 apiece. This gives a total deal size of between HK$1.37 billion and HK$1.67 billion. A standard 15% greenshoe applies, which, if exercised, will inject another 105 million shares into the IPO, increasing the maximum size of the deal to $247 million.

The price range values the company, on a pre-shoe basis, at between 14.3 and 17.5 times its estimated 2009 earnings, according to joint bookrunner numbers. On a post-shoe basis, the valuation increases to between 14.8 and 18.1 times 2009 earnings, based on joint bookrunner numbers.

This makes Bawang somewhat cheaper than its comparables. Since there are no other shampoo manufacturers listed in Hong Kong, investors are looking at companies that make similar products, or other asset light distributors of branded products. In the first category, the most obvious candidate is Hengan International, China's leading personal hygiene company, which is trading at around 22 times 2009 estimated earnings. In the second category, there is sportswear company Li Ning, which is trading at around 20 times 2009 estimated earnings.

Bawang is positioned in a market dominated by foreign brands. Proctor and Gamble (P&G) has a 39% share of China's shampoo sales, much more than Bawang's 7.6%. Within the niche herbal shampoo sector though, Bawang comes out top with a 36% market share.

"The shampoo market will continue to grow steadily... even under a relatively unfavourable economic downturn, as a result of its necessity nature," said Michelle Huang, a Shanghai-based senior analyst at consultancy Euromonitor International.

Huang said that continued growth in shampoo usage is driven by a range of factors. One such factor is product innovation: Bawang's competitors, even the leading players, are developing herbal products. This year, for example, P&G started a line of herbal products under its Rejoice brand. Another major factor is the male market segment, since men have contributed more to the recent increase in shampoo usage than women.

361 Degrees will trade under the symbol 1361, BaWang (霸王) under the symbol 1338.

I like the consumer angle of these stocks, but I'd like to see prices fall from the IPO before I buy. These two will get a once over as I prepare my shopping list.