Yuexiu Property seeks HK$3.84b in rights issue

Yuexiu Property became the second Hong Kong-listed mainland developer in a week to tap the equity market in an attempt to diversify its fundraising in the middle of a prolonged industry downturn.

It aims to raise HK$3.84 billion via a rights issue. Yuexiu's new shares are priced at HK$1.25 per share, a 25 per cent discount from its close on Wednesday. Developer Country Garden announced last week a HK$3.18 billion rights issue priced at HK$2.50 per share, a 31 per cent discount to last Wednesday's closing price.

Shares of Yuexiu and Country Garden ended down 1.2 per cent and 1.7 per cent respectively yesterday to HK$1.65 and HK$3.43, while the Hang Seng Index shed 0.1 per cent.

Mainland property shares have been trading at large discounts to their net asset value in recent years, pushing developers to issue a record amount of bonds offshore.

"Equity financing tends to be cheaper than debt financing, but pricing of shares will remain as the key," said Edison Bian, research head of China property at UOB Kay Hian in Hong Kong.

In a filing with the Hong Kong stock exchange on Wednesday night, Yuexiu said it will sell as many as 3.07 billion shares. Net proceeds will improve its net gearing ratio, cash position and availability of working capital to facilitate expansion, it added.

Yuexiu had a net gearing ratio of 62.7 per cent at the end of June, while that for Country Garden was 67 per cent.