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UPDATE 2-China's Glorious Property seeks $1.5 bln in IPO

Published 09/14/2009, 02:23 AM
Updated 09/14/2009, 02:27 AM
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* Real estate developer seeks to raise HK$11.93 billion

* Price range of HK$4.00-HK$5.30/shr; final price Sept. 24

* Trading debut seen on Oct. 2

(Adds details, background)

By Michael Flaherty and Parvathy Ullatil

HONG KONG, Sept 14 (Reuters) - Chinese real estate developer Glorious Property hopes to raise up to $1.54 billion in a public offering that comes amid a rush of IPOs from domestic property groups.

The deal is part of an estimated $15 billion worth of IPOs coming to Hong Kong in the next few months, as companies seek to list before year-end and take advantage of a stock-market rally.

The price range of the Glorious offering is HK$4.00-HK$5.30 per share, with a base offer size of 2.25 billion shares in total, according to a term sheet obtained by Reuters on Monday.

If the Glorious Property IPO prices at the top end of the range, it will surpass China Resources Land to become the second largest Chinese property developer listed in Hong Kong by market capitalisation.

China Overseas Land and Investments is the largest Chinese property developer listed in Hong Kong with a market cap of HK$19.1 billion.

The offering's roadshow begins this week, with bankers shopping the IPO to institutional investors to gauge demand and determine the ultimate price.

A successful IPO would allow Glorious Property to raise cash and pay back investors.

Fellow property developer Evergrande also plans to raise an estimated $1.5 billion, with other Chinese real estate companies also in the IPO pipeline. The companies hoped to list last year, but pulled the plans when markets tumbled.

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OPPORTUNITY?

Analysts and bankers say that while the opportunity is there, a glut of real estate IPOs may see mixed success, as investors see little difference between the offerings and companies. Getting to market first will be an advantage, they say.

"In some sectors, like the Chinese real estate developers, there are a lot of companies coming to market at the same time, making it difficult to differentiate between them," said Christina Chung, Senior Portfolio Manager with Allianz's funds unit RCM.

"Giving investors, who typically look for differentiation, a lot of choice does not help valuations."

UBS AG, JPMorgan Chase and Deutsche Bank are handling the offering.

The final price of the Glorious Property IPO is planned for Sept. 24.

Hedge funds and Western banks invested in Chinese property companies two years ago after a real estate boom sent valuations in the sector soaring and produced some successful IPOs.

Such pre-IPO investments were expected to be profitable to investors who thought the credit bubble would last and planned for a quick and easy pay-out after the listing.

But the credit bubble burst, and the ensuing financial crisis quashed those hopes, leaving investors with illiquid holdings worth much less than hoped.

Now, with China lifting a ban on IPOs and the Hong Kong IPO market heating up, companies are rushing to list while the window is open.

Chinese property prices in 70 cities rose 2.0 percent in August from a year earlier, compared with a 1.0 percent annual rise in July.

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Glorious Property is expected to begin trading on Oct. 2. (Editing by Dhara Ranasinghe)

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