Shanghai Real Estate prices offer at 4% discount

In the tenth placement by a Hong Kong-listed developer in six weeks, Shanghai Real Estate raises $106 million for land bank acquisitions and new developments.
Shanghai Real Estate yesterday sold HK$827.6 million ($106 million) worth of company shares through the tenth share placement by a Hong Kong-listed property company in the past six weeks.

Developers based in Hong Kong and China are taking advantage of the current high share prices to raise cash for land bank acquisitions and investors continue to mop up the paper without too much hesitation.

YesterdayÆs transaction came as Shanghai Real Estate's shares are moving back up towards the record high of HK$2.73 reached on November 22. The share price tumbled 9.4% last Tuesday when the local market recorded its worst one-day loss in more than five years on the back of concerns that the US economy was slowing, but by Monday this week, the stock had resumed its upward trend, closing 2.4% higher at HK$2.52.

The Hang Seng Index is also on the run again and market watchers believe it is poised to return above 19,000 in the next few sessions. Yesterday, it closed at 18.949 points after adding 1.3%.

Shanghai Real EstateÆs total sale comprised 342 million shares, of which 212 million, or 62%, were new shares sold through a top-up placement. The remaining 130 million shares were sold by a company controlled by the chairman.

The shares were offered at a price between HK$2.32 and HK$2.42, which represented a discount of 4%-8% versus MondayÆs close. It was priced at the top end of the price range for a 4% discount after the book was said to have been ôseveral times subscribedö.

Like many of the other recent Hong Kong placements, the offer was launched in the Hong Kong morning while the stock was suspended from trading and the order books closed at 4pm. The short window meant that Europe-based investors had a limited time to decide whether or not to participate and as a result, the order book was skewed towards Asia, sources familiar with the deal said.

More than 60 investors bought into the transaction, including many locally based long-only funds, specialist real estate funds and the type of big hedge funds that tend to take a longer-term view with regard to their investments.

Citigroup was the sole bookrunner for the transaction, which came on the heels of the investment bank doing a $460 million block trade in Korean tobacco company KT&G overnight. The two trades will give the bank a boost in the ECM league tables where it is currently trailing just below Merrill Lynch in seventh place.

Investors saw the placement, which accounted for 16% of the enlarged share capital, as a good opportunity to buy into the company which is in the middle of an aggressive expansion phase. Only last week it announced its involvement in a new town development in Shanghai and on November 7 it increased its stake in another Shanghai project to 99% from 44%, resulting in a 264,000 square metre increase to its existing land bank. Since that announcement, the share price has rallied 28.6%.
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