Swire Group

Sale of direct stake in Swire Properties may bring relief for investors

Some analysts say sale of direct stake in Swire Properties may bring relief for investors

PUBLISHED : Friday, 05 October, 2012, 12:00am
UPDATED : Thursday, 07 May, 2015, 4:01pm

John Swire & Sons' decision to offload its remaining direct stake in one of Hong Kong's biggest commercial landlords could spell relief for investors and brighten the property firm's short-term outlook, analysts say.

The share price of Hong Kong-listed Swire Properties closed nearly 3 per cent lower at HK$23.25 yesterday after John Swire & Sons, Swire Properties' founding shareholder, said it would to sell 3.71 per cent of Swire Properties at HK$22.51 a share, according to a stock exchange filing yesterday.

Despite the price fall, some investors believe the Swire stock is still too high relative to its peers.

The stock is trading at a discount of about 20 per cent to its net asset value, compared with 25 per cent for Wharf and 30 per cent for Hysan Development, two of Swire's major competitors.

But, some analysts say that at least for the short term, the sale of its founding shareholder's direct stake could have a positive effect on the company's stock price because the sale would eliminate one of the stock's biggest near-term uncertainties and downside risks.

"Swire Properties is doing quite well in the decentralised office market, where the rental prices are usually quite resilient. The stock is still a good choice for long-term investors," DBS Vickers Securities analyst Jeff Yau said.

After the sale, John Swire & Sons will cease to be a direct shareholder but it also said yesterday that it would retain control of the developer through Swire Pacific, which owns 82 per cent of Swire Properties.

John Swire owns 44.46 per cent of the issued share capital in Swire Pacific.

"Swire Pacific has no intention to sell down any of its controlling shareholding in Swire Properties," a John Swire & Sons spokesman said.

The sale would boost the liquidity of the firm and make it highly likely to be included in the MSCI HK Index soon, Citigroup analysts led by Anil Daswani, wrote in a note yesterday.

"With a free float of 17.99 per cent, Swire Properties is likely to become eligible for inclusion in MSCI HK at the next review in November," the report said.