were seen at 6.0%.
Moody’s rating for Nagacorp
is one notch above its rating
for the Cambodian sovereign,
which has never issued
offshore bonds. The rating
agency noted that Nagacorp
generates nearly of its revenue
from tourists and does not
rely on local banks or capital
markets for funding. Much
of its financing so far has
come from its founder and
controlling shareholder,
Malaysian businessman Dr
Chen Lip Keong, who holds a
65% stake.
However, Moody’s said
Nagacorp’s rating is constrained
and unlikely to rise more than
one notch higher than the
sovereign.
“We view the jurisdiction
as very high risk due to the
country’s non-transparent
policymaking environment,
very weak institutional
strength, and limited monetary
flexibility,” wrote S&P, noting
that Nagacorp’s reliance on
tourism meant that it could be
affected in the event of travel
disruptions or a deterioration in
the political environment.
Nagacorp’s concession
runs until 2065 and it has a
monopoly in the area until
the end of 2035. The original
NagaWorld resort was
expanded in 2017 when Naga
opened a short distance away,
connected by an underground
shopping centre.
The company is developing
a second casino and hotel
complex in Vladivostok, Russia,
which is expected to open next
year, but this is outside the
restricted group that is issuing
the bond.
S&P said that Nagacorp could
seek further development
opportunities in Mongolia
and Kazakhstan, but that
discussions were at a
preliminary stage.
The coastal resort town
of Sihanoukville is the main
centre for the gambling
industry in Cambodia,
with two dozens of casinos
already in operation or under
construction, mostly funded by
Chinese money.
Foxconn mulls strategic tranche
Equities Jumbo A-share IPO would be first since 2014 to include cornerstone-like investorsBY KEN WANG, FIONA LAUThe landmark Shanghai IPO of
FOXCONN INDUSTRIAL INTERNET may
be the first mainland listing
in more than four years to set
aside a portion of shares for
strategic investors.
The Shenzhen-based
subsidiary of Taiwan’s Foxconn,
the world’s largest electronics
contract manufacturer, is
considering selling a portion
of its IPO shares to a group of
strategic investors who would
agree not to sell them for a
certain period, according to
two sources familiar with the
situation.
The practice, similar to
cornerstone investments in
Hong Kong IPOs, is designed to
ease regulators’ fears over the
impact of sizable floats on the
broader market.
FII is yet to set a target size
from the IPO, but it plans
to use the proceeds to fund
investments of some Rmb27bn
(US$4.24bn).
“The big fundraising size is
one of the key hurdles to the
company getting final approval,”
said one of the sources. “If
the issuer introduces strategic
investors, it could effectively
reduce the fundraising size to
the public, so as to ease the
burden to the broader market,”
said the source.
This is particularly important
at a time when the the China-US
trade dispute is weighing on the
domestic markets.
FII cleared a listing hearing
on March 8, only 36 days after
it filed the IPO application. The
company, however, has since
been waiting for CSRC’s written
approval. During this period, the
Shanghai Composite Index has
fallen more than 5%.
FII is yet to determine
whether to introduce strategic
investors, given it still needs
to discuss with regulators,
according to the sources.
FII did not respond to a
request for comment.FII’s float is seen as a milestone
in China’s drive to attract major
domestic listings from the fast-
growing technology sector. It
is the first high-profile tech
firm to enjoy a fast track for
a mainland IPO, allowing it to
bypass the long queue of listing
applications.
However, the regulator has
been reluctant to grant final
approvals for large floats to avoid
further pressuring the volatile
stock market. Some issuers have
to reduce their fundraising size
to secure approvals.
For instance, biotechnology
company WUXI APPTEC, which
cleared a listing hearing 19 days
after FII, has already completed
its Rmb2.25bn Shanghai IPO
after cutting its fundraising size
by 61% to meet the regulatory
requirement on the valuation
cap of 23 times historical
earnings.
FII, on the other hand, has
very limited room to lower its
IPO size. The company plans
to sell up to 10% of its enlarged
capital in the IPO, which
matches the minimum free-float
requirement for a domestic
listing.
It also has little room to lower
the valuation, as FII is already at
a deep discount to listed peers.
Assuming FII floats a 10% stake
and raises the full Rmb27bn,
its IPO price would represent a
post-IPO historical P/E of about
16 times.
Its listed peers in the
computers, communications
and other electronic equipment
manufacturing industry were
traded at a historical P/E of 37.
times as of May 3.FIRST IN FOUR YEARS
A tranche for strategic investors
would be the first on an A-share
IPO since China imposed its
unwritten valuation cap in mid-
2014.
In January 2014, in one of the
most recent examples of IPOs
involving strategic investors,
Shaanxi Coal raised Rmb4bnin Shanghai. About 50% of
the shares were sold to seven
strategic investors, with a 12-
month lock-up period.
However, some bankers
away from FII’s deal reckon
the introduction of strategic
investors may be controversial,
given these investors have
guaranteed allocations for hot
IPOs.
Thanks to the artificially
low prices, limited supply and
strong aftermarket performance,
A-share IPOs are normally
hundreds or even thousands
times oversubscribed. (Wuxi
AppTec’s retail tranche was 4,
times covered.) Investors can
only receive allocations on a pro-
rata basis.
One of the sources close to
FII’s float, however, reckons
the introduction of strategic
investors is reasonable for large
IPOs.
“Strategic investors will face a
lock-up period, so it is not unfair
to other investors. It is a good
way to reduce the impact on the
broader market,” said the source.
“Meanwhile, if the company
introduces strategic investors, it
would select very high-quality
investors, which will be positive
for the company’s business in
the future,” said the source.
FII was founded in 2015
to design and manufacture
communication equipment,
cloud service equipment,
precision tools and industrial
robots. It posted net profit of
Rmb16.2bn last year on revenue
of Rmb354.5bn.
Foxconn directly and
indirectly controls 94% of FII,
according to the filing.
CICC is the sponsor on the
float.
The company plans to use
the proceeds for investment
in industrial internet
platforms, cloud computing,
the production of internet
equipment, research and
development of 5G industrial
internet systems and computing
data centre projects. For daily news stories
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