The Hong Kong IPO of Calgary-based Sunshine Oilsands, which successfully raised HK$4.49 billion (US$576.6 million), proves that international companies are still coming to Hong Kong. This is the first international company to launch a Hong Kong IPO after the Italian luxury brand Prada, which raised US$2.14 billion in June 2011. The transaction is the largest IPO in Hong Kong since the US$1.9 billion offering by New China Life Insurance in December last year. (Coach and Kazakhmys completed their listings by introduction on the Hong Kong stock exchange last December and last June respectively, without raising any funds.)

The Canadian resources company, which focusses on the development of oil sand leases in the Athabasca oil sands region, priced its 923.3 million new shares at the bottom of an indicative range of between HK$4.86 and HK$5.08. The base deal comes with a greenshoe option of an additional 15% of the offering shares.

The company is backed by a group of pre-IPO investors, raising a total of C$450 million (US$453 million) in equity proceeds from China Life, Bank of China Group Investment, Orient International Resources and Hong Kong private equity Cross-Strait Common Development Fund in June 2011.

To draw enough subscriptions, Sunshine Oilsands introduced three cornerstone investors: China Investment Corporation, Sinopec and Washington-based asset manager EIG Global Energy Partners, taking up US$350 million worth of subscription funds or over 50% of the offering size.

The company is planning to use at least 93% of the net proceeds for funding the development of oil sands and heavy/ light oil projects, with about 63%.

Its début performance was not so sunny, with its shares losing 3.33% to close at HK$4.71.

Oil sands, which make up 96% of the oil reserves in Canada, are an important unconventional source of crude oil. The country accounted for 11% of the global oil reserves at the end of 2010, according to a research report by BOC International. Sunshine Oilsands is the largest owner of wholly owned oil sands leases in Athabasca, which accounts for 66% of the oil sands area in Alberta.

The company is yet to turn profitable as its first project is set to start production only in 2013. BOC International estimates the firm to be profitable in 2014 with an initial net margin of 6.18%. Based on asset value, its valuation is placed at C$2.334 billion. Major risks highlighted are a fall in the crude oil prices, tougher environmental laws and execution risks given the early stage of the company’s development.

BOC International, Deutsche Bank and Morgan Stanley were the joint global coordinators, joint bookrunners and joint sponsors.