Developer taps HK market - for a price
Small mainland developer Kai Shi China, which owns two residential projects near Dalian, is tapping the Hong Kong equity market as it battles rising interest rates and tightening credit conditions in its home market.
The mainland developer plans to offer 150 million shares priced between 87 HK cents and HK$1.20 each, and expects to raise up to HK$180 million through a listing on the main board. But listing costs will eat up a big chunk of the proceeds. After deducting underwriting fees and estimated expenses payable in connection with the share offering, Kai Shi said the net proceeds from the flotation would be HK$126.2 million.
That suggests that listing costs will eat up HK$53.8 million, or 30 per cent of the HK$180 million target. This would be higher than the HK$49.6 million net profit it generated in 2010.
However, the company was upbeat about prospects for this year, saying it expected net profit in 2011 would be at least 150 million yuan (HK$183.3 million).
Han Liping, executive director and chief financial officer of Kai Shi, described the impact of austerity measures on its property sales so far as 'limited'.
'Unlike major cities, Lvhsunkou is a third-tier city that's not subject to the restrictions on the number of home purchases,' she said.
At present, 46 cities, including Beijing and Shanghai, prohibit residents from buying more than two flats as the mainland authorities seek to curb speculation. As a result, property sales have plunged by as much as 70 per cent, sparking a nationwide price war among major developers.
By August next year, Kai Shi will face a 475 million yuan construction bill for Kai Shi Xi Jun, one of two housing projects it owns in Lvshunkou, which should be completed before the end of 2013.
Chairman Kai Chenglian said the firm's financial position was healthy.
He expects the company will generate 570 million yuan in contracted sales when it releases the remaining homes in the second phase of Kai Shi Jia Nian next year.
This, with its 100 million yuan in cash in the bank and on hand should be sufficient to meet its construction costs. About 80 per cent of the estimated proceeds of the share placement, or 101 million yuan, would be used to buy land in Beihaijiedao near the site of a second housing project in Lvshunkou.
