HSBC completed a top up placement for Henderson Land yesterday (Monday) raising HK$3 billion ($388 million) for the property developer. The structure of the transaction meant the company's major shareholder Lee Shau Kee subscribed for an equal number of shares to the ones sold, in the process slightly diluting his stake from 64.5% to 61.2%.
With CLSA as joint lead, a total of 92.44 million primary shares were sold at HK$32.45. This represents a 7% discount to the stock's close and 25 days trading volume.
While the discount is wider than has been seen in the recent past, the deal size is much larger. The stock is also up a hefty 49.15% over the course of the year and has doubled since the end of SARS in late May.
As FinanceAsia went to press, books were just being closed in the US. The transaction represents 5.1% of the company's enlarged share capital
Many analysts believe the Hong Kong property market is at an inflexion point and in Henderson's case are watching to see if the company uses proceeds to bid for new developments. One of the concerns cited about the stock is its small landbank and lack of visible future growth prospects.
According to CSFB research, the company has so far bid for only 7% of estimated development profits in 2004. Should the company start to become more aggressive, however, analysts say there is scope for a re-valuation of the company's Net Asset Value (NAV).
It is currently trading at a 12% discount to NAV compared to a 4.76% premium for Sun Hung Kai at one end of the scale and 59.5% discount for New World Development at the other.
Having initially predicted negative development margins for 2003, some analysts now believe improving fundamentals will see Henderson Land end the year at 4%. The company's margins are then forecast to increase to 17% in 2004 and 30% in 2005.
