I had a leisurely walk yesterday in Lingan Tiandi, a Pearl River Delta version of the famous Shanghai Xintiandi just next to Zumiao, repository of the cultural heritage of Foshan and home to martial arts masters Wong Fei-hung and Ip Man.
I could not help thinking it’s such a nice project. Kudos to the Foshan municipal government which put together a national heritage-grade cultural and tourism district.
Credit also goes to Shui On Land chairman Vincent Lo for replicating one of the most elegant and successful business models, making him an authority on urban renewal in the mainland. The biggest beneficiaries are Foshan residents who must be enjoying such a hip new place.
Everyone is happy except Shui On Land shareholders, particularly Lo, whose flagship stock has flirted with HK$2, a level not seen since the 2008 financial tsunami. The share price is a deep discount to its net asset value of HK$4.50.
Shui On Land is one of the biggest letdowns on the Hong Kong stock market. Those who have visited Shanghai Xiantiandi have probably heard the story that the developer uses western management style.
Look at the company’s all-star board which includes former HSBC taipan John Bond, Li & Fung chairman William Fung, just to name two. Chief financial officer Daniel Wan formerly held the purse strings at Bank of East Asia.
So what went wrong?
Shui On Land was slow to achieve asset turnover. Each of the company’s master plans in cities such as Shanghai, Chongqing, Dalian or Foshan, took more than a decade, even two, to complete.
Because Lo knew how much value was being created, he was not in hurry to sell. Sales took a 56 per cent dive in the first five months.
Most institutional investors, on the other hand, are hungry and impatient. They’d rather have fast food than dim sum. Still, compared with some of its peers, Shui On Land has not made a loss nor piled up debt. But it’s no winner either.
Things may be about to change. Shui On Land flagged a “big change” on the cover of its latest annual report.
Lo will be spending more time in public service with his appointment to the Airport Authority, his next job after the Trade Development Council.
That means Shui On Land will be in the hands of a new leader who can execute a more goal-oriented approach. The company is also looking for a chief executive to replace Freddy Lee, whose three years in the driver’s seat have done little to fire the business.
Meanwhile, investors should consider whether they’re better off buying Shui On flats or shares.
Stay tuned for the next chapter.
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