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Renhe Commercial makes the first IPO in more than a month in Hong Kong amid the choppy market. From left are Renhe's CFO Kong Fankun, Chairman Dai Yongge and executive president Wang Hongfang at a press conference on the IPO held yesterday. China Daily

Renhe Commercial, a developer of underground shopping malls on the mainland, announced its initial public offering (IPO) as scheduled yesterday in Hong Kong to raise HK$4.2 to HK$5.13 billion despite the ongoing financial turmoil.

The listing of Renhe is the first in Hong Kong in more than a month, as investors are taking a cautious approach on investment at a time of global financial upheaval.

The company will sell 3 billion shares today to public investors at HK$1.40 to HK$1.71 apiece, representing 15 percent of its issued share capital immediately upon the completion of the global offering.

"The market is fluctuating but we have gained the recognition from our investors and we think we will get listed as scheduled," said Wang Hongfang, the company's executive president (investments & operations).

Three of Renhe's IPO underwriters predicted that the company will earn 4.7 billion yuan in net profit next year, a source said. At the middle of its IPO price range, the price to forecast 2009 earnings ratio is 5.5 times.

It is a strategic move rather than to raise money for expansion, the source said. The offering aims to mark the domains for the development of its kind, the source said.

The Hong Kong public offering is expected to start at 9 am today and close at noon on Oct 8.

Allotment results and the offer price are expected to be announced on Oct 14. Mainboard trading of its shares is expected to commence under stock code 1387 on Oct 15.

Asked if the downturn of the property market on the mainland will affect Renhe, Wang said, "We are not a property developer. We build shopping malls for rental income. Macroeconomic measures will not affect us."

It is a new concept of a mixed property and rental shares when Renhe sells 20 percent of its operation in order to cover its cost and leaves 80 percent for long-term rental income, the source said.

Renhe is the largest privately-owned operator and developer of stand-alone underground shopping centers for wholesale and retail sales of apparel and accessories on the mainland in terms of gross floor area (GFA) under operations as of Dec 31, 2007, according to the Euromonitor Report.

Currently, the company operates three underground shopping centers in Harbin, Heilongjiang province, and Guangzhou, Guangdong province with an aggregate GFA of approximately 111,318 sq m.

It has two more projects under development with an aggregate GFA of 1,411,558 sq m. Seven projects will be carried out given the fact the mainland government has already granted a 40-year operation right to Renhe.

The company will perform and make profit in a stable manner thanks to the supportive government and this is what investors are looking for at times of instability in the financial market, the source said.

(HK Edition 09/30/2008 page3)