Chinese developer readies biggest Hong Kong IPO since September: sources

[HONG KONG] A unit of Chinese developer Longfor Group Holdings got the green light for the largest Hong Kong listing in 7 months in what would be a measure of investor confidence in the troubled sector.

The property management subsidiary Longfor Intelligent Living has won approval for an initial public offering (IPO) that may raise around US$1 billion, according to people familiar with the matter.

At that size, it would the largest IPO in the financial hub since Dongguan Rural Commercial Bank's US$1.2 billion deal in September. It would be testing appetite for shares tied to China's problematic real-estate industry, which has been roiled by multiple debt defaults and slumping new-home prices over the past few months. The IPO may also indicate a period of recovery in the market after extreme volatility because of the war in Ukraine and Beijing's regulatory crackdown.

Longfor Intelligent hasn't decided yet when to launch the IPO, deliberations are ongoing and details could still change, said the people, who asked not to be identified as the information is private.

IPO activity in Hong Kong has been subdued so far this year, with the amount raised slumping 90 per cent to US$1.9 billion compared with the same period of 2021, and deals have been on the smaller side. The latest real-estate listing of more than US$100 million was Jinmao Property Services Co. Its shares are down about 28 per cent since their debut on Mar 10.

Still, Longfor Intelligent's parent company has more solid credit metrics and stronger liquidity than peers, according to Moody's Investors Service and Bloomberg Intelligence.

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Longfor Group's 81 per cent rebound in contracted sales in March from February may help its operations, including land acquisitions, BI analysts Daniel Fan and Adrian Sim wrote in a note.

Longfor Intelligent runs developments including residential communities and shopping malls across China, and has over 1,500 projects under management, according to a preliminary prospectus filed with the Hong Kong's exchange.

CCB International Holdings, China International Capital, HSBC Holdings and JPMorgan Chase & Co are joint sponsors of the deal. BLOOMBERG