China Resources Land slips 8pc on placement

Business | Tereza Cai 23 Oct 2019

Shares of China Resources Land (1109) fell 7.88 percent to HK$33.30 after it announced placing 200 million shares at HK$33.65 per share to raise a total of HK$6.72 billion.

The price of HK$33.65 was 6.9 percent discounted compared with its Monday closing price of HK$36.15. The shares will be placed with no less than six independent entities.

It is believed more mainland developers will follow suit.

Several sought to raise funds recently through placing shares and issuing bonds as the government is tightening property companies' financing in a bid to emphasize that houses are for living in instead of speculating.

Country Garden (2007), the mainland's third-largest property developer by market value, issued senior notes due in 2025 raising US$500 million (HK$3.9 billion) in mid-September and China Vanke (2202) raised 2.5 billion yuan (HK$2.77 bilion) at a 3.55 percent interest rate by issuing bonds. Powerlong Real Estate (1238) and Kaisa Group (1638) took the same action.

China Resources Land's debt ratio is not high, and it did not have any urgent need for fundraising, said Daniel So Pui-fung, strategist at CMB International, who thought the move was primarily because the company wanted to take advantage of high stock prices.

However, there is no catalyst for the re-evaluation of mainland developers' shares, so even if the share prices decline, it is not a good time to buy at the bottom, said So.

For the mainland property industry, easing lending policy overall but tightening the lending policy for property developers hasn't led to much fundraising demand for mainland developers so far, said So, but he believed some developers with high share prices might decide to raise funds.

Newtree (1323) also proposed placing up to 250 million shares at HK$0.46, an 11.9 percent discount to its Monday closing price. The expected proceeds are about HK$114 million.

UKF (Holdings) (1469) proposed placing 250 million shares at HK$0.205 to raise HK$50.95 million. That was a 16.3 percent discount to its Monday closing price.

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