Is New World Development Co. Ltd. (00017.HK) retreating from Hong Kong and mainland China?
Speculation about the conglomerate’s plans is rife after the news that it is selling its telecommunication business to HKBN Ltd. (01310.HK) for HK$650 million (US$83.6 million), the Hong Kong Economic Journal reported Friday.
The latest deal followed the group’s divestitures of several property investments in the mainland China, a logistics center in Kwai Chung and a stake in Hong Kong-based investor services company Tricor Services Ltd.
The sale of the telecommunication arm is expected to be completed in the first half of this year.
New World chairman Henry Cheng Kar-shun denied the firm was withdrawing its investments from the mainland and Hong Kong, saying it is only reallocating capital from second- and third-tier cities to first-tier cities.
The telecom unit, now valued at a historical price-to-earnings multiple of 24 times, has a relatively low market share of 3-4 percent in corporate solutions.
The sale will boost HKBN’s market share to 6-7 percent.
HKBN chief executive William Yeung Chu-kwong said the transaction price is fair given a 10 times price-to-EBITDA multiple at the end of June last year.
EBITDA is earnings before interest, taxes, depreciation and amortization.
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