Chinese real estate developer Zhongliang seeks $453m in HK IPO

The flag of Hong Kong Exchanges & Clearing Ltd. (HKEx), top center, the Chinese national flag, bottom center, and the Hong Kong SAR flag, bottom right, fly in the Central district of Hong Kong, China, on Wednesday, March 2, 2016. Photographer: Justin Chin/Bloomberg

Shanghai-based real estate developer Zhongliang Holdings Group is raising up to HK$3.54 billion ($453 million) by selling 530 million shares in an initial public offering (IPO) in Hong Kong, according to its prospectus.

The 25-year-old firm priced its shares, which represent about 15.01 per cent of its enlarged issued share capital, at HK$5.20 to HK$6.68 apiece at its IPO scheduled for July 16.

The IPO could mint a new billionaire in China’s real estate industry. According to a Forbes report, the listing would value the more than 80 per cent stake held by Chairman Yang Jian at $2.5 billion.

In its prospectus, Zhongliang said it has a portfolio of 353 projects across 124 cities in China. Its land bank amounted to 38.9 million square meters as of the end of March.

“We principally focus on developing quality residential properties and offers 3 standardized product series, namely, the Shanti, the Glory, and the Royal series, targeting first-time purchasers, first-time upgraders and recurrent upgraders,” the company said.

Zhongliang closed over Rmb100 billion ($14.6 billion) in contracted sales in 2018.

In its prospectus, the company said it will use 60 per cent of the listing proceeds to build residential properties and 30 per cent to repay debts. The remaining 10 per cent will be used as general working capital.

Investment banks CCB International Capital and Guotai Junan Securities are serving as joint global coordinators for the public offering, while Huatai Financial Holdings, and ABCI Capital, as well as Japan’s Nomura International have been hired as bookrunners.

It was in November 2018 when the company first filed for IPO in Hong Kong. The filing, however, lapsed in May, prompting Zhongliang to update its prospectus and resubmitted a new version in May.

Zhongliang was founded in 1994 by Wenzhou businessman Yang and has become the third largest developer by sales in China. From 2016, the company acquired 168 parcels in third- and fourth-tier cities.

Despite this expansion, the company said its debt-to-equity ratio has rapidly decreased. The ratio was at 58.1 per cent at the end of 2018, down from 339.5 per cent the year before. The ratio was even higher at 1,790.2 per cent at the end of 2016.

“Looking forward, we strive to become one of the leading comprehensive real estate developers in China and to create value for a better life,” Zhongliang said on its website.