Minmetals Land Ltd. (00230.HK), a real-estate arm of China Minmetals Corp., expects to acquire one million square meters of land within the next five months by spending about 5 billion yuan (US$810 million), a senior executive said.
“We will start taking land in the rest of the year, mostly in the Pearl River Delta and Yangtze River Delta,” head of corporate finance Gus Szeto told EJ Insight in an interview in Huizhou.
“We will focus on projects in second-tier capital cities,” he said, adding that it won’t be tough for the firm to secure land as its parent company has a huge presence in regions like Hunan and Guangxi.
Minmetals Land had HK$6.22 billion (US$799 million) in cash as of end-December last year. The company is yet to announce its interim results for 2014.
It had a land bank of 4.5 million square meters in total as of last year, of which 33 percent was in the pan-Bohai Rim, 26 percent in central China, 24 percent in Pearl River Delta and 17 percent in Yangtze River Delta.
The Chinese firm has yet to acquire new land this year, after buying about one million square meters of land in Nanjing and Changsha in 2013.
Minmetals will use internal capital to fund the land acquisition in the coming months. “We would also seek cooperation with private-equity firms to fund the upcoming developments,” Szeto said.
The executive expects the mainland property market to improve in the rest of the year on the back of looser credit and market policies.
“Financing is much easier now, with shorter approval periods,” he said.
To give the property market a lift, the People’s Bank of China has recently urged commercial banks to speed up lending to first-home buyers and set lending rates at a reasonable level.
Apart from organic business growth, Minmetals Land is eyeing opportunities to acquire some small Chinese developers.
The company is targeting firms that have exposure to cities where Minmetals Land is yet to have a presence. Chongqing is one such city, Szeto said.
“The mixed ownership encouraged in our parent company will support to our acquisition plans,” he said.
As for overseas development, Minmetals Land is interested in stepping into the Hong Kong market, Szeto said, adding that the company will start with some small projects in the city.
“It would be a little challenging to take big ones as we have to seek partnership with non-listed developers,” he said.
Minmetals Land expects to receive an asset injection from its parent, though the exact timeframe is not clear.
“The management of the parent company has confirmed that it is still on the agenda, but we are not sure whether it would come about this year,” Szeto said.
“It is expected that the parent will inject 20 to 30 billion yuan of assets to us, including land bank of about 10 million square meters.”
Minmetals Land will be interested more in assets in second-tier cities, the executive said.
With the firm’s market capitalization at just HK$3.5 billion, some analysts have expressed concerns about the real-estate arm’s ability to absorb huge assets.
But Szeto dismissed the concerns, saying: “We are not worried, as we can take China Merchants Land and CITIC Pacific cases as reference. If they can do it, why can’t we?”
CITIC Pacific Ltd. (00267.HK) has agreed to pay 227 billion yuan to buy CITIC Ltd. from its state-owned parent. The deal will be funded primarily through new share issuance to CITIC Group Corp. and to institutional investors, according to a regulatory filing in April. CITIC Pacific’s market capitalization was at HK$55.54 billion as of last Friday.
As for China Merchant Land Ltd. (00978.HK), it completed the acquisition of 11 projects in four cities from its parent China Merchants Property Development Co. Ltd. (2000240.CN) in November last year for HK$6.69 billion.
It issued up to 2.9 billion new shares to fund the deal. As of March last year, its market capitalization was at HK$1.11 billion before shrinking to HK$918 million by end-September.
“To complete the injection, we will finance through a number of vehicles including convertible bonds, placing new shares and some cash,” said Szeto, who expects to issue some bonds this year.
Last year, the real-estate firm raised US$350 million from bonds and HK$3.8 billion from a 3-year syndication loan. It also secured a HK$5.3 billion 5-year syndication loan in December.
Minmetals Land’s net debt at end-2013 stood at HK$3.93 billion, compared with HK$2.45 billion a year earlier, while the net gearing was up 3.7 percentage points at 34.7 percent, according to a regulatory filing.
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