Book building and the management roadshow started on August 1 for the proposed IPO of China Shipping Nauticgreen. With a price range of HK$1.56 to HK$2.50 per share, and 600 million new shares offered to investors to fund the purchase of containers, the deal was aiming to raise up to HK$1.5 billion. But as the US markets dropped more than 4 per cent overnight last Thursday, and the Hang Seng Index in turn tumbled almost 1,000 points on Friday morning, the deal was postponed until market conditions improve.
Events showed the vulnerability of deals that would otherwise be seen as cheap and attractive.
The company is one of the world's top 10 lessors of containers to shipping lines. It is benefiting from cheaper freight rates brought about by the large number of new ships coming to market. Lower vessel rates spur demand for shipping and, in turn, for the leasing of containers.
Given the relatively modest size of the offering, investors primarily focused on a simple PE as a valuation metric. The price range made for an attractive valuation, equivalent to a multiple of about six to 10 times 2011 earnings. That compared with 9.8 times for competitors Textainer, and 10.5 times for TAL International Group, according to data from Bloomberg.
At the bottom half of the range, at least, the deal offered good value and a sensible discount. And while sister company China Shipping Container Lines (CSCL) expects to report a loss for the first half of the year, the institutional tranche for China Shipping Nauticgreen's IPO was said to have been fully covered after only two days of book building.
