Date
17 August 2018
Vincent Lo has informed Shui On Land that he has "from time to time been reviewing options with respect to his interest in the company," according to a regulatory filing Wednesday. Photo: Bloomberg
Vincent Lo has informed Shui On Land that he has "from time to time been reviewing options with respect to his interest in the company," according to a regulatory filing Wednesday. Photo: Bloomberg

Will Vincent Lo privatize Shui On Land?

Is Vincent Lo, the man who helped create Shanghai’s famous Xintiandi shopping and entertainment district, really serious about privatizing his flagship firm, Shui On Land?

In response to media speculation about possible privatization by major shareholder Lo, Shui On Land said it has been informed that Lo is in talks with banks for financing and has from time to time been reviewing options with respect to his interest in the firm, including the possibility of seeking to acquire the entire issued share capital.

However, no definite plans have been determined, no agreements relating to any of these options have been signed, and no definite proposal put forward to the company, it said in a stock-exchange filing Wednesday, adding that there is no certainty if any proposal will be made or, if made, what terms such proposal may involve.

Shui On Land shares surged as much as 15 percent to a four-year high following the vague confession, as investors snapped up the counter that was trading at merely half the book.

Lo makes for an interesting case when one looks at Hong Kong developers who benefited from getting into the market early and later sought to cash out.

Much like tycoon Li Ka-shing, whose property flagship Cheung Kong Assets is now said to be in talks to sell Chongqing assets for over 20 billion yuan after cashing out from Shanghai in a similar-size transaction last year, Lo sold a large chunk of his property projects last year.

Since October, Lo cashed out some 14 billion yuan from various deals, including the sale of its Ruihong project in Shanghai as well some assets in Dalian.

Prior to that, the company sold its Chongqing property project to Vanke in May and a Foshan project to Country Garden in April 2016.

Aside from investing in a property project with Citic in Wuhan a year ago, Shui On Land has been in a selling mode in a bid to lower its heavy gearing, which stood at 81 percent in 2015. Currently, the gearing level is said to be at 57 percent.

Despite winning much acclaim for its Shanghai Xintiandi project, which saw the company blend modern shops aesthetically into classic architecture, Shui On Land seemed to have lost out in the last decade to mainland developers, many of whom have been aggressive in land acquisitions and have even replicated Shui On’s business model.

To speed up its expansion process, Shui On Land originally planned to spin off Xintiandi but the plan is yet to turn into reality. This prompted the firm to cash out from property projects instead and redeem some convertible bonds to enhance the investment yield.

Now with the surging share price, it is doubtful if the shrewd Lo would privatize his flagship, which is on the way up with market capitalization standing close to HK$20 billion.

The tycoon will probably wait and watch and hope his wealth will grow further, even if only on paper.

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RC

EJ Insight writer

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