COUNTRY REPORT CHINAThe IPO, which could be the world’s
biggest tech float in 2018, is expected to hit
the market in the second half of the year
and likely to be in Hong Kong, the people
have said.
The company is expected to add more
banks later, the people have said, indicating
that Credit Suisse, Deutsche Bank, JP
Morgan and more Chinese banks are likely
to be on board.
Another source familiar with the
situation, however, has said the roles for
global banks have not been decided and
that no formal mandate has been given to
any Chinese bank.
A spokesman for Xiaomi declined to
comment.
The IPO, which could value Xiaomi as
much as US$100bn, is highly anticipated in
the market.
Xiaomi earlier told bankers it would top
its annual revenue target as much as 18%.
It is estimated to post a net profit of at
least US$1bn in 2017, banker projections,
based on the company’s revenue estimate
of US$17bn–$18bn, have shown. Profit for
2018 is estimated to reach about US$2bn.
› IQIYI FILES CONFIDENTIALLY FOR IPO
IQIYI , Baidu’s video-streaming service, has
filed confidentially for a potential US IPO
to raise about US$1bn, according to people
familiar with the situation.
The listing is likely to come at the end
of the first quarter or early in the second
three months, according to the people.
A iQiyi spokesperson declined to
comment.
IFR reported last October that iQiyi,
a Chinese-style Netflix, had hired Bank
of America Merrill Lynch , Credit Suisse and
Goldman Sachs to arrange its proposed IPO.
Chinese search engine Baidu announced
last February that iQiyi had sold convertible
notes to a group of investors for US$1.53bn.
Baidu invested US$300m and among other
major investors were Hillhouse Capital,
Boyu Capital, IDG Capital and Sequoia
Capital.
The video-streaming service, which
competes with Tencent and Alibaba’s
Youku Tudou, had 481 million monthly
active users as of the end of 2016,
according to a Reuters report citing data
from Baidu.
› AGILE SPIN-OFF TO OPEN BOOK
A-LIVING SERVICES , the property management
business of Chinese property developer
AGILE GROUP HOLDINGS , is set to start
bookbuilding for a US$300m–$500m Hong
Kong IPO on January 24, according to
people close to the deal.
Pricing is slated for February 2.
HSBC and Huatai Financial are joint
sponsors of the IPO.
According to the filing, the net profit
of A-Living was Rmb123m for the first six
months of 2017, up 56% from a year earlier.
On completion of the proposed spin-off,
Agile is expected to hold an interest of
not less than 50% in A-Living, which will
remain as a subsidiary, according to an
announcement from the parent last year.
A-Living is principally engaged inproperty management, property sales,
property inspection, advertising and
tourism services.› HUAMI FILES FOR NASDAQ IPOHUAMI , maker of fitness trackers for Chinese
smartphone company Xiaomi, has applied
for a US$150m Nasdaq IPO, according to a
filing with the US Securities and Exchange
Commission.
The company, founded in 2014Financial leasing first for JFL
Equities Jiangsu Financial Leasing gets approval for Rmb4bn Shanghai listingJIANGSU FINANCIAL LEASING is to launch an IPO
in China’s domestic market, opening a new
source of funding for the fast-growing,
capital-intensive sector.
The state-owned institution cleared a
China Securities Regulatory Commission
hearing on January 16 for a Shanghai IPO of
about Rmb4bn (US$622m). It still requires
written approval to proceed with the listing.
If the float goes through, JFL will become
only the second listed financial-leasing
company in the A-share market, and the first
to complete an IPO. Bohai Capital, a unit of
Chinese conglomerate HNA Group, went public
in Shenzhen through a backdoor listing in 2011.
Apart from JFL, JIC LEASING and JUXIN
INTERNATIONAL LEASING are also awaiting CSRC
approval for Shanghai IPOs.
“The move signals that the regulators have
officially opened the door for domestic listings
of such companies,” said a banker working on
an IPO for another financial-leasing entity.
He believes more financial-leasing companies
will be encouraged to list domestically and that
entities already listed in Hong Kong may seek a
second listing on the mainland.
China’s financial-leasing industry has
achieved rapid growth in recent years after
policymakers issued guidelines in 2015 to
expand financing channels and facilitate
listings for the sector.
Since 2016, at least three financial-leasing
companies have been listed in Hong Kong,
including China Development Bank Financial
Leasing, China Rongzhong Financial
Holdings and FY Financial. HAITONG UNITRUST
INTERNATIONAL LEASING , the financial-leasing
unit of Haitong Securities, is also mulling a
Hong Kong IPO.
Few companies have chosen to list
domestically because of the long approval
backlog and regulatory uncertainties,
preferring Hong Kong instead.
“A successful listing of Jiangsu Leasing willset a benchmark for the sector in the A-share
market, which will be an important reference
for issuers to choose listing destinations
between the mainland and Hong Kong,” said
the banker.CAPITAL SHORTAGE
At the end of June 2017, financial-leasing
contracts in China amounted to Rmb5.6trn,
up 19.7% year on year, according to a
report from the country’s financial-leasing
association.
Shortage of capital has become a serious
challenge given the market’s fast growth.
Jiangsu Leasing, for example, enjoyed
compound annual growth rate of 30.8%
between 2014 and 2016, seeing its revenue
increase from Rmb1.06bn to Rmb1.81bn
during the period. However, its Core Tier 1
capital adequacy ratio fell to 10.7% at the end
of September 2017 from 14.1% in 2014. This
will remains comfortably above the minimum
regulatory level of 7.5% at the end of 2018.
“Financial leasing is a capital-intensive
industry, which needs strong financing
ability to support business development,”
said another banker.
“Currently, the dominant financing
sources for the sector are still debt
financing, such as bank loans, bonds and
asset-backed securities. So, more and more
companies will consider carrying out
equity financing to boost capital,” said the
banker.
Jiangsu Leasing plans to offer not more
than 782m shares, or about 25% of its
enlarged company capital.
Huatai United Securities is the sponsor.
Proceeds will be used for working capital.
The company reported a 2016 net profit
of Rmb824m, up 12.5% year on year. For
the first nine months of 2017, net profit
came in at Rmb867m.
KEN WANG, FIONA LAU