HONG KONG: Beijing-based property developer Longfor Properties plans to raise up to HK$7.1 billion from a Hong Kong initial public offering (IPO), despite the increasingly picky investor appetite for mainland real estate offerings.

Longfor, one of the biggest developers in western China, is selling 1 billion new shares, or a 20 percent stake, at HK$6.06 to HK$7.10 apiece, according to an e-mailed document sent to fund managers yesterday.

The offering price of Longfor will be around 12 to 14 times the developer's forecast earnings next year, while mainland developers Agile Property and Greentown China trade at 11.6 times and 9 times their forecast 2010 earnings respectively.

Five cornerstone investors, including the Government of Singapore Investment Corporation, Temasek, Hong Kong Land and Ping An Insurance, will buy a combined $197.5 million worth of shares in Longfor, according to the share-sale document.

Patrick Yiu, associate director of CASH Asset Management, said the subscription response of Longfor may remain stagnant, as many property developers on the mainland have scrambled to cash in by offering new shares in Hong Kong.

"Longfor does not have a significant advantage when compared with other property developers on the mainland. Investors can choose from plenty of choices available now," Yiu said, adding that investors may be more interested in the leading mainland property stocks.

Recent new offerings of mainland property stocks have received sluggish market response from retail investors in Hong Kong. The weak market response also suspended the new offerings of Shenzhen-based Excellence Real Estate and Fujian developer Mingfa Group.

First Shanghai Securities strategist Linus Yip said the recent mainland property IPOs have dispersed market assets, while he expects retail investors will not be very much interested in the sector in the short term.

"Investors worry that the central government will withdraw the loose monetary policy and curb the surge in mainland property market," Yip said, citing this concern as a key reason for investor caution.

(HK Edition 11/03/2009 page4)