Property developer China Resources Land raised $143 million from a top-up placement through JPMorgan on Friday (January 20), taking advantage of a strong run in its share price over the past couple of months.
The company placed 300 million shares at a price of HK$3.725 each, representing a discount of 8.02% to Friday's closing price of HK$4.05. The shares were initially offered in a range of HK$3.60 to HK$3.85, or a discount of 4.94% to 11.11%.
The shares were sold by China Resources (Holdings), who will subscribe to the same amount of new shares at the same price. The new shares will account for about 10.8% of the existing issued share capital and 9.76% of the enlarged capital.
In total, the book attracted close to 50 accounts and was around three times covered even though the offer was not launched until almost 6 pm local time on Friday and stayed open for just one hour. The time of the sale meant US investors were not really given the chance to participate, but interest from both Europe and Asia was good, according to the bookrunner, who noted that many investors also took the opportunity to top up their existing holdings in the stock.
Investors that bought the deal are said to have been attracted by the company's good earnings prospects following its acquisition of a number of properties from its parent China Resources Holdings in mid-November. China Resources Land did a non-deal global roadshow last month to highlight the impact of that acquisition and the placement saw three large orders from investors who met with the management at that time.
The company's share price has rallied 67% since the property injection in November and rose by 10.7% and 4.5% in heavy volumes on Thursday and Friday respectively.
"There is clearly a lot of interest in this name at the moment and the placement gave investors a chance to acquire shares in size," one observer notes.
Aside from the company-specific issues, the swift sale also highlighted the renewed interest among international investors for mainland property plays, which bankers expect will be one of the more active sectors in the primary market this year.
Investor interest for the China property sector started to wane about 18 months ago, when Beijing began to introduce various measures to cool down surging property prices, particularly in Shanghai. But expectations are that some of those measures will be eased during the course of this year, and earnings at the property companies seem to be on track.
China Resources Land is expected to see an increase of more than RMB340 million in annual rental income from the new properties and a 72% increase in market cap to RMB17.36 billion that will make it the second largest red-chip developer listed in Hong Kong after China Overseas Land & Investment.
In the first half of 2005 China Resources Land posted revenues of HK$1.23 billion, which was in line with the HK$2.4 billion it recorded for the full year 2004.
The properties bought from its parent include the largest shopping centre in Shenzhen (MIXc); the China Resources Building, a 26-storey office and retail complex in Beijing; and the China Resources Times Square, a 34-storey commercial building in Shanghai.