WH Group gains 7.42pc in Hong Kong debut though debt concerns remain
World's No1 pork producer raises US$2.3 billion in downsized second try at Hong Kong flotation
WH Group rose by as much as 10.64 per cent in Hong Kong yesterday after the world's biggest pork producer succeeded in mounting an initial public offering on its second attempt, after cutting its fundraising target and offer price.
The stock jumped to HK$6.86 at 9.32am, compared with the offer price of HK$6.20. It finished at HK$6.66 yesterday, up 7.42 per cent on the day. The benchmark Hang Seng Index added 0.2 per cent.
The company said in a statement yesterday that its Hong Kong tranche of shares was 55.22 times oversubscribed, while the international tranche, which accounts for 90 per cent of the issue size, was "moderately oversubscribed".
Analysts are worried about the company's ability to repay its debt. They also fret that the acquisition of US meat producer Smithfield Foods last year is a heavy debt burden to the company.
"WH Group may be hoping to capitalise on Smithfield's reputation, but WH also faces the cost of repaying the loan to purchase the company, combined with the volatility of today's international pork market," said James Gellert, chief executive of Rapid Ratings, a firm that specialises in rating companies.
"Though WH isn't likely to default in the next 12-18 months, especially after the capital the IPO brings in, it also doesn't necessarily have an easy road ahead of it."
