Top Spring pursues plan to sell shares in HK

PUBLISHED : Friday, 11 March, 2011, 12:00am
UPDATED : Friday, 11 March, 2011, 12:00am

Top Spring International Holdings has revived its plan to list in Hong Kong as credit conditions continue to tighten on the mainland.

The Shenzhen property developer aims to raise up to HK$2.01 billion from the initial public offering.

It said it would use 90 per cent of the proceeds from the share sale to acquire new projects for development.

The company had planned to raise capital late last year but postponed the share offering because of poor market conditions. Chief financial officer Lam Jim believes the conditions are better now for tapping the market.

The mainland's property sector, which has lost its appeal to investors of late, is set to face more austerity measures from Beijing, which is trying to curb speculation and slow growth.

Analysts widely expect the central bank to raise interest rates this year to combat inflation and this is likely to push borrowing costs higher. The property sector is expected to underperform this year.

Wong Chun-hong, the founder and chairman of the company, said it would capitalise on its strong strategic relations with domestic and international partners and ability to acquire land at a relatively low cost.

To fund land acquisitions, Hong Kong-listed mainland developers have been borrowing heavily in the capital markets this year in the form of high-yield debt, paying investors annual interest of more than 11 per cent.

Top Spring's turnover dropped 88 per cent to HK$286.95 million in the first nine months of last year, compared with the same period in 2009, according to its listing prospectus.

It booked a net loss of HK$98.38 million, against a net profit of HK$622.74 million a year earlier. However, the developer estimated it would make a net profit for last year of no less than HK$450 million.

At the end of last year, Top Spring had 13 projects at various stages of development in Shenzhen, Changzhou, Hangzhou, Chengdu, Dongguan and Tianjin.

Lam said the company's portfolio had a higher proportion of retail real estate projects than residential properties.

He said this provided a regular income stream for Top Spring, which focuses on acquiring land in second and third-tier cities.

One of the company's major shareholders and partners is Scarborough Group, founded by British businessman Kevin McCabe, the chairman of English football club Sheffield United.

The shares are priced between HK$6.23 and HK$8.10 and the target listing date is March 23.

Credit squeeze

The cost of borrowing on the mainland is expected to rise as rates increase

The amount Top Spring International Holdings is expected to raise in its share offering in Hong Kong, in HK$: $2b