Hong Kong billionaire Li Ka-shing’s Hui Xian real estate investment trust (REIT) said it plans to add more China-based properties to its current portfolio after its initial public offering (IPO).
The REIT which launched its IPO on Monday will be the first yuan-denominated listing outside of China.
It is expected to start trading on the Hong Kong Stock Exchange on April 29.
Hui Xian REIT, part of Cheung Kong Holdings, is seeking to raise as much as US$1.7 billion (RMB 11.2 billion) from its IPO, the first ever yuan-denominated share sale to be offered outside of China’s tightly regulated market.
And its executives were in town on an investor roadshow to raise interest on the REIT when it starts trading on the Hong Kong Stock Exchange at the end of this month.
“You want the secondary market to do well, you’ve got to go out and sell, so that the book is many times over-subscribed, so that at the end of the day investors are happy with the stock. (And) when the stock opens, there is enough demand and that creates the secondary market trading,” said John Lim, Non-Executive Director of Hui Xian Asset Management.
The REIT said it is also keeping its options open for other property investments in the mainland.
H.L Lam, Chairman of Hui Xian Asset Management said: “It could be in Beijing, it could be in other cities in China, it could be a property which is similar to Oriental Plaza in order to generate synergy since Oriental Plaza is doing hotels, office leasing, shopping mall leasing, and apartment leasing. So the new property, if we are able to get one, would probably be in one of the four areas or a combination or similar type.”
So far there has been strong demand for the share offering, with the institutional portion of the IPO, or 80 per cent of the offered shares, fully taken up.
The offer price will be between RMB 5.24 and RMB 5.58 per unit.
Hui Xian REIT is backed by Oriental Plaza, a commercial complex which comprises malls, offices, apartments and the Grand Hyatt Beijing hotel.
Oriental Plaza is valued approximately at RMB 31.4 billion.
Analysts also said the performance of the REIT will be closely watched and it could spur more yuan-denominated IPOs outside of China.
“Appetite outside of China for RMB-related products seems to be increasing. The potential is definitely there, especially when you have assets companies with assets that generate very stable cash flow. Through a REIT channel, that is the easiest way to recycle the capital,” said Loy Wee Khim, Associate Director of Standard & Poor’s.
Still, some analysts are not upbeat on the prospects of the REIT, saying that it may fall prey to the slowing down in China’s property sector.
In a new report, Moody’s Investors Service said that it has changed its outlook for the China property sector to negative from stable.
Source : Channel NewsAsia – 14 Apr 2011