China Feihe (6186.HK)

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China’s best-selling baby milk maker probably gets HK$10 billion of retail bids amid Hong Kong IPO revival
* The retail portion is probably oversubscribed by 8 to 10 times, locking up as much as HK$9.8 billion of funds, according to survey
* China Feihe follows Budweiser and ESR Cayman mega listings as Hong Kong enjoys a revival in IPOs on market rebound

Enoch Yiu  
Published: 5:59pm, 5 Nov, 2019

China Feihe Limited, maker of the nation’s best-selling infant milk formula, probably attracted close to HK$10 billion of orders from retail investors in what could be the third largest stock offering in Hong Kong this year, according to a survey of stockbrokers.

The company offered 10 per cent of its global sale of 893.34 million shares to individual investors and 90 per cent through international placements. The offering could raise as much as HK$8.93 billion (US$1.14 billion) at the top end of its offer range of HK$7.50 to HK$10 apiece. Only Budweiser Brewing Asia-Pacific and ESR Cayman have raised more money from Hong Kong IPOs this year.

The retail portion is probably oversubscribed by 8 to 10 times, locking up as much as HK$9.8 billion of funds from the banking system, according to estimates from six brokers surveyed by The South China Morning Post after the offer closed on Tuesday. The company, whose baby milk is endorsed by actress Zhang Ziyi of Crouching Tiger Hidden Dragon fame, may have benefited from greater publicity in the run-up to its share sale.

“An oversubscription of about 8 times is good, considering that the IPO is quite sizeable,” said Edmond Hui, chief executive of Bright Smart Securities in Hong Kong, which took part in the survey. “The IPO came at the right timing as the market sentiment has improved and Feihe’s well-known retail brand helped attract investors.”

China Feihi shares are expected to start trading on November 13.

The company is seizing the opportunity to raise funds as market sentiment has improved and stocks in Hong Kong rebounded following a summer of troubles sparked by anti-government protests. The Hong Kong Monetary Authority and some of the city’s biggest lenders have cut interest rates to spur the economy while the government took measures to support the housing market.

More details in https://www.scmp.com/business/companies/...10-billion

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Chinese baby milk maker endorsed by film star Zhang Ziyi suspends shares after just seven days’ trading as report urges investors to steer clear
* A report by GMT Research advised investors to avoid the stock because the company hadn’t paid a dividend in the five years before IPO
* China Feihe has rejected the report’s findings and said it will issue a clarification about the allegations

Enoch Yiu  
Published: 5:32pm, 22 Nov, 2019
Updated: 5:41pm, 22 Nov, 2019

China Feihe, the mainland’s largest domestic maker of baby milk formula, suspended trading of its shares before the market opened on Friday, a day after an independent research firm urged investors to avoid the stock as it may become the target of short-sellers.

The company, which had only traded in the Hong Kong stock market for seven days, will issue a clarification about the allegation raised by the GMT Research report released on Thursday, said chairman Leng Youbin in a stock exchange filing on Friday morning.

China Feihe priced its IPO at HK$7.5 per share, the lower end of an indicative range, to raise HK$856 million, making it the seventh-largest offering in Hong Kong this year. The company started trading on the Hong Kong exchange on November 13. Its share price fell 16 per cent to close at HK$6.28 on Thursday.

China’s best-selling baby milk maker probably gets HK$10 billion of retail bids amid Hong Kong IPO revival

The GMT report, which is aimed at subscribers only, recommended investors “avoid” the stock as it may be a target of short-sellers in the future. A copy of the report, authored by analyst Nigel Stevenson, was obtained by the Post.

Beijing-based China Feihe, whose products are endorsed by the actress Zhang Ziyi, who starred in Crouching Tiger, Hidden Dragon, has strong revenue and profit but had not paid any dividends to its shareholders during the five years before its flotation. Instead, the company used part of its IPO proceeds to pay a dividend to its pre-IPO shareholders.

“Unfortunately, high levels of profitability combined with a lack of dividends are fraud-like traits,” Stevenson said in the report.

“There is a risk Feihe is more fake than fabulous. It is not currently possible to short the shares, but Feihe is an obvious future target for short-sellers. Investors should be cautious and verify Feihe’s market position before investing; otherwise, we recommend they avoid the stock.”

More details in https://www.scmp.com/business/companies/...i-suspends