Buy-back plan gives Soho China a boost in HK
Hong Kong-listed mainland developer Soho China is planning to buy back up to US$200 million worth of shares, saying its share price doesn't reflect its balance-sheet strength.
The announcement, made in a filing with the Hong Kong stock exchange around midday yesterday, pushed up its share price from HK$5.67 at noon to HK$5.99.
The stock closed at HK$5.94 yesterday, gaining 5.32 per cent over the previous day while the Hang Seng Index dropped 0.79 per cent. The stock has been trading between HK$4.56 and HK$7.40 in the last year.
'The board believes that the shares have been trading at a level that significantly undervalues the company's assets and strength of its balance sheet,' chairman Pan Shiyi said. 'The board also believes that the company's strong financial position will enable it to conduct the proposed share repurchases while maintaining sufficient financial resources for the continued growth of the group's operation.'
As of the end of last year, Soho China, which focuses on commercial property development in Beijing and Shanghai, had a total cash and bank deposit of 15.71 billion yuan (HK$19.28 billion). The company was in a net cash position, compared with an average gearing ratio of 60 per cent of 25 mainland developers monitored by securities and investment banking group Jefferies. Quoting government figures, Jefferies said Soho China reached 8.6 billion yuan in presales since the launch, of which 1.35 billion yuan was collected this month, 76 per cent more than in May.
'We like its sharp focus on commercial property and strong financial position, and see new acquisitions as accretive. While its interim earnings may decline 24 per cent year-on-year on a skewed booking schedule, we see share price weakness as a good buying opportunity given accelerating presales,' Jefferies' equity analysts Jack Gong and Christie Ju said.
They said they expected the company to achieve 15-20 billion yuan in sales this year, slightly lower than the company's target of 23 billion yuan.
Saying the buy-back announcement would have a positive impact on the stock, Macquarie Capital Securities' head of China and Hong Kong property research David Ng Ka-chun expected Soho China to book 18.7 billion yuan in sales this year.
Soho China has this number of projects on the mainland•16 are in Beijing, 10 in Shanghai and one is in Hainan