Far East Consortium issued its zero-coupon convertible at par and would redeem the bond at 105.1 on maturity on April 13, 2009, giving investors a yield of about 1 per cent.

The conversion price was set at $2.25, a 30.06 per cent premium to its closing price of $1.73 on Wednesday. The stock was suspended from trading yesterday but is expected to resume today. It has risen more than 400 per cent in the past 12 months.

The size of the offering could be increased by US$6.98 million upon exercising of a greenshoe option by Deutsche Bank. But as of yesterday, the option had not been exercised, a market source said.

This issue seemed well received amid ample liquidity in the market. It was about 10 times oversubscribed and geographically well diversified, according to Deutsche, the sole arranger and bookrunner.

Market watchers said investors were keen on the bond on hopes of the potential upside in the shares.

Far East Consortium said the bondholders had the right to convert their bonds into shares at any time between mid-May and 30 days before the maturity date but the issuer was also given the right to call back the bond after two years.

'On an equity perspective, the shares could easily rise by more than 30 per cent [between the conversion period],' said Wu Huimin, a fund manager at State Street Global Advisors, adding the key profit upside of the company would be from California Garden, a development project in Shanghai.

'The land [for California Garden] it acquired was at a very low cost,' Mr Wu said.

SBI-E2-Capital analyst Carmen Tang estimated a pretax margin of 55 per cent and HK$1.9 billion net profit from the Shanghai project.

In Hong Kong, its newly refurbished Cosmopolitan Hotel is expected to open this month. Together with two new hotels in Central and Tai Kok Tsui, the hotel division would contribute steady revenue of about 30 to 35 per cent by 2006, Ms Tang said.