Seeing stars

14 May 2013 By John Foley Follow @johnsfoley

The Chinese securities firm’s short-term prospects look bright if capital markets continue to open. But peer beyond the next few years’ earnings, and the case is less persuasive. Broking is a fragmented, commoditised business. Galaxy is big, but potential rivals are bigger.

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Galaxy Securities is set to price its initial public offering in Hong Kong on May 15. The brokerage set an indicative price range for its shares of HK$4.99 to HK$6.77, implying a market capitalization at the middle of the range of HK$44 billion ($5.7 billion).
The company plans to sell just over 20 percent of its equity, and aims to raise HK$8.5 billion of new money, after fees and commissions. Galaxy said that 60 percent of the funds raised would go to developing its margin finance and securities lending business.
After the listing, Galaxy will remain 70 percent owned by Galaxy Financial Holdings, a vehicle controlled by the Chinese state investment vehicle Huijin. The company is also preparing for a similar-sized IPO in the Chinese mainland, pending regulatory approval, consisting entirely of new shares.
Investors including insurer AIA, China Life Insurance and the Malaysian sovereign fund Khazanah have agreed to act as “cornerstone” investors, pledging to take a stake in the listing beforehand.

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