Chinese developers’ Hong Kong back-door listing units fall out of favour

Mainland developers’ plans to float themselves in the city dim hopes for massive asset injections

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Chinese developers’ Hong Kong back-door listing units fall out of favour

Mainland developers’ plans to float themselves in the city dim hopes for massive asset injections

Peggy Sito
20 October 2014

Once stock market darlings, Hong Kong firms used as back-door listing vehicles by the mainland’s property developers have lost their charm for investors, with most of the counters plunging from the time when news of the acquisition was announced.

Hopes for large-scale asset injections dimmed after some big players sought their own listing status on the Hong Kong stock exchange.

“Back-door listing is their Plan B to set up a financial platform in preparation for future fundraising,” said Bocom International analyst Alfred Lau. “Plan A is floating itself on the Hong Kong stock market. When Plan A proceeds well, there is no Plan B. Investors’ dreams of seeing big asset injections should end.”

Dalian Wanda Group, controlled by mainland billionaire Wang Jianlin, is seeking to raise up to US$6 billion in a Hong Kong share float of its property arm. Analysts said investors had raised concerns over the role of its back-door listing vehicle, Wanda Commercial Properties (Group), following the listing.

In April last year, the group bought Hengli Commercial Properties for HK$465.5 million and later changed its name to Wanda Commercial Properties.

Shares in Hengli, which were suspended from trading on February 25 last year, soared 465.22 per cent to HK$1.95 on the day the news was announced. They then hit a high of HK$4.66 on June 18, 2013.

On Friday, the stock shed 1.9 per cent to finish at HK$1.54.

The trend of mainland developers seeking back-door listings in Hong Kong began in 2012 when China Merchants Property Development bought Tonic Industries, now known as China Merchants Land. In the same year, China Vanke bought a 74 per cent stake in Winsor Properties, now renamed as Vanke Property (Overseas).

State-owned developers that followed the trend included Shanghai government-owned Greenland Group and the property arm of the mainland’s largest food trader and processor, Cofco.

Alan Jin, a property analyst at Mizuho Securities, said some of the back-door listing vehicles had performed better than others.

“Their parent firms have injected assets,” he said, adding that the scale of the injections might not have been as large as investors had anticipated.

China Merchants and Greenland have made injections worth more than HK$7 billion in total.

Shares of Greenland Hong Kong Holdings, formerly known as SPG Land (Holdings), closed down 0.67 per cent at HK$2.95 on Friday, well below the HK$8.52 they hit in August last year.

Cofco Land Holdings, formerly Hong Kong Parkview, climbed to a 52-week high of HK$2.40 on July 18, 2012, on news that Cofco had embarked on a HK$362.18 million takeover for the property investment company.

The shares then rose to HK$4 on September 17 last year on news that the company had injected mainland property assets valued at HK$14.17 billion into its Hong Kong-listed unit.

They closed unchanged at HK$1.65 on Friday.

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