Investment shift tipped for Swire Pacific's spin-off
Analysts are tipping a strong shift of investment from Swire Pacific to Swire Properties, which is scheduled to debut next month as Swire Pacific spins off its property arm.
Swire Pacific shares dropped 1.49 per cent to close at HK$92.5 yesterday after hitting an intra-day high of HK$95 following the announcement of the details of the spin-off.
Swire said, by way of introduction, the spin-off would be achieved by distributing shares to existing shareholders.
'Given that property constitutes the most attractive assets of Swire Pacific, investors may shift to Swire Properties once it starts trading next month,' Phillip Capital Management fund manager Li Kwok-suen said. He said Swire Pacific shares could stay volatile in coming days.
In an announcement filed to the stock exchange, the company said shareholders would be entitled to seven Swire Properties shares for every 10 Swire Pacific A shares and seven Swire Properties shares for every 50 Swire Pacific B shares they held. It said it would distribute 18 per cent of Swire Properties shares to the shareholders. Both A and B shares are publicly quoted, widely held and traded by both institutional and retail investors. But A shares are included in the major stock market index tracked by many institutional investors and therefore tend to be more actively traded.
Swire Properties shares are expected to commence trading on January 18.
The spin-off decision comes after a market downturn forced the company to shelve a listing in November 2009 that was intended to raise HK$20.84 billion.
Lee Wee Liat, regional head of property at Samsung Securities (Asia), said institutional investors who were only interested in Swire's rental property portfolio had so far had no choice but to hold shares in the conglomerate.
'But now they will go for Swire Properties as it will be the conglomerate's future growth engine,' he said.
Swire Properties owns 14 million square feet of investment properties in Hong Kong, including Pacific Place in Admiralty and Cityplaza and Taikoo Place in Quarry Bay, and 1.55 million square feet of rental property in Beijing.
In August, Swire Pacific said HK$10.75 billion of its planned capital expenditure till 2014 would go into property. In the second half of this year, the company spent HK$4.25 billion in Hong Kong and on the mainland. Another HK$2.72 billon has been earmarked for property investments next year and HK$1.71 billion for 2013.
The group has 7.18 million square feet of developments pending in Shanghai and Chengdu, and 213,000 square feet in Hong Kong.