Link set to plunge on rights issue

Link Real Estate Investment Trust (0823) may plunge as much as 20 percent to HK$50 when it resumes trading today but it would still be higher than the rights issue price of HK$44.2 per unit, offered at nearly a 30 percent markdown from the market price.

The largest real estate trust in Asia plans to issue an additional unit for every five units held by existing holders, totalling 425.64 million rights units at HK$44.2 each, 29.6 percent cheaper than the closing price of HK$62.8 last Thursday.

Its first-time rights issue since listing will raise as much as HK$18.8 billion, while up to 50 percent of the funds will be used to repay debts, and the remaining for future investment.

As Link's units will resume trading today, local independent equity analyst Patrick Shum Hing-hung anticipates the price could fall 10 to 20 percent on the news of the rights issue and debt repayments.

Everbright Securities International's securities strategist Kenny Ng Lai-yin said investors could buy Link's units while existing holders should subscribe to the option if the price decline over 10 percent below HK$55, citing a stable dividend income for the long term.

If the units dip less than 10 percent, Ng said existing holders could also choose to sell the rights units to be offered and then buy more units after the rights issue is completed.

In other news, Green Economy Development (1315) said it has issued around 1.50 billion shares at HK$0.015 apiece, 6.3 percent lower than the closing price of HK$0.016 last Thursday.

The net proceeds are estimated to be HK$22.3 million, to repay debts and interests.