Sea sets off for US at low tide
Equities Smaller-than-expected IPO covered on first day of launchBY S ANURADHASEA, a Singapore-based internet
company backed by Tencent
Holdings, is pitching its US
IPO at a smaller-than-expected
US$596m–$696m to overcome
the lack of familiarity of US
investors with South-East
Asian issuers and its own weak
financials.
The response has been good
so far, with books covered on the
first day of launch last Monday.
Sea filed to raise up to US$1bn
last month and analysts projected
a valuation of more than
US$7.5bn during premarketing.Instead, the US$12–$14 per share
price range implies a valuation of
US$4.8bn–$5.5bn post greenshoe,
closer to the US$3.75bn valuation
Sea achieved when it raised
US$170m from investors in
March 2016.
Sea raised a further US$550m
earlier this year at an undisclosed
valuation.
“That [US$7.5bn valuation]
was the expectation of analysts,
whereas the price range is based
on investor feedback, but, being
a US issue, we can always go
above the price range if demand
is good,” said a person with
knowledge of the transaction.The gaming and e-commerce
company is selling 49.69m
shares, with a 7.45m greenshoe
option.
The listing is set to be the
first in the US for a Singapore
e-commerce company. Sea has
positioned itself as South-East
Asia’s Tencent, but its earnings
are nothing like those of its
39.7% shareholder. The company
recorded revenue of US$195.4m
in the six months to June 30, up
from US$166.6m a year earlier,
but rising sales and marketing
expenses pushed its net loss up
to US$165m from US$87m. (In
this year’s first half, Tencentearned US$4.8bn on revenues of
US$15.67bn.)HIGH-GROWTH MARKETS
In addition, US investors lack
familiarity with South-East Asian
names. Malaysia’s MOL Global
was the last company from
the region to wade into the US
market with a US$168.75m IPO
in 2014, but had a disastrous
debut and was delisted in 2016
following poor trading.
Nevertheless, market
participants said investors would
not pay much heed to Sea’s red
ink as this is usual with tech start-
ups. “What they will get with Sea
is exposure to the high-growth
markets in South-East Asia,” said
a banker away from the IPO.
Sea’s gaming, e-commerce
and digital businesses are spreadBMW revs up Dim Sum market
Bonds First multinational corporate issue in two years takes advantage of favourable cross-currency swap rateBY INA ZHOUGerman carmaker BAYERISCHE
MOTOREN WERKE has printed the
first public Dim Sum bonds from
a multinational corporate issuer
in over two years, breathing
life into the dormant offshore
renminbi sector.
BMW, rated A1/A+ (Moody’s/
S&P), last Wednesday priced
Rmb1bn (US$152m) of three-year
Reg S bonds at par to yield 4.25%,
flat to final guidance.
Since China’s surprise
currency devaluation on August
11 2015, CNH-denominated
public bond offerings have
become very rare, except for
sporadic transactions, mostly
from Chinese banks.
However, BOC Aviation, a
Singapore-based aircraft-leasing
company, rated A–/A– (S&P/
Fitch), printed Rmb1bn of three-
year Dim Sum bonds at 4.50% on
Wednesday, shortly before BMW,
pointing to improving market
conditions.
The last trade from a
multinational corporate issuer
was in July 2015 when New
Zealand’s Fonterra Co-operative
Group did an Rmb800m(US$128m) 10-year Formosa trade
at 4.5%, following its Rmb1bn
4.0% five-year Dim Sum print a
month earlier.
Activity in the primary Dim
Sum awakened late last month,
thanks to a relatively stable
renminbi and cross-currency
swap (CCS) rates conducive to
issuers.
BMW’s issue follows those
of National Bank of Canada,Royal Bank of Canada and BOC
Aviation, making the past three
weeks the busiest period in two
years for the Dim Sum market.
Market participants said the
four deals were opportunistic
in that they depended mainly
on arbitrage gains rather than a
need for the currency.
BOC Aviation managed to
price the issue inside its US
dollar bond curve, according to abanker familiar with it.
“In general terms, for foreign
issuers funding themselves in
Euribor or US Libor, I think the
CNH market definitely provides
opportunities for cross-currency
arbitrage,” said the banker
familiar with BMW’s issue.
However, it is not clear that the
offshore renminbi pool is deep
enough to support more trades,
despite the favourable CCS rates.News