Red Avenue shares slump in Hong Kong trading debut

Shares of new materials maker Red Avenue New Materials Group Co. Ltd. (9607.HK; 603650.SH) fell in their trading debut on Tuesday, as the company was one of four new listings on the Hong Kong Stock Exchange ahead of the Oct. 1 National Day holiday. Red Avenue’s shares closed at HK$40.14 by the midday break, down 8.8% from their IPO price of HK$44.

The company sold 68.1 million Hong Kong-listed H-shares, raising net proceeds of about HK$2.9 billion ($370 million). The Hong Kong portion of the listing for local investors was about 2.4 times oversubscribed, while the international portion was 1.75 times oversubscribed. Eight cornerstone investors bought 22.6 million shares, or about a third of the shares on offer.

Red Avenue’s three main product areas comprise rubber additives for tires, electronic materials and fully biodegradable materials. Its revenue rose 29% in the first half of this year to 2.13 billion yuan ($317 million) from 1.65 billion yuan a year earlier. Rubber additives accounted for 61.9% of total revenue in the latest six-month period, down from 70% a year earlier. Electronic materials rose to 32.5% of revenue in the latest period from 26.7% a year earlier, while fully biodegradable materials rose to 5.6% of revenue from 3.3%.

The company recorded a profit of 389 million yuan in the first half of the year, up 10.8% from 351 million yuan a year earlier.

By Doug Young   

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