Hopewell Holdings' Gordon Wu still blazing new trails
Gordon Wu raised 386 billion yuan last month and is charging ahead with his Mega Tower project in Wan Chai, not bad for a man who is 76
Toh Han Shih and Denise Tsang
At the age of 76, Gordon Wu Ying-sheung, is not too old to learn new ways to keep driving his flagship property and infrastructure companies forward, no matter how bumpy the road may become.
And so to those who know the founder and chairman of Hopewell Holdings, the property developer responsible for building the iconic cylinder tower in Wan Chai that bears its name, it came as no surprise to learn that Wu last month blazed yet another a trail by making the first ever yuan-denominated share placement outside China.
The placement raised 386.4 million yuan (HK$476 million) for his Hong Kong-listed toll-operator, Hopewell Highway Infrastructure (HHI), which operates the Guangzhou-Shenzhen superhighway.
This pioneering spirit saw HHI launch Hong Kong's first corporate yuan bonds in 2010, which raised 1.38 billion yuan.
"Even though I have passed the torch onto my son Thomas, I will never really retire," Wu told the South China Morning Post when celebrating Hopewell Holdings' 40th anniversary in August. "I am an oldster, but still work on things I am interested in."
Thomas, managing director of both Hopewell Holdings and HHI, said the latest fundraising exercise, which was used to replenish working capital, was also aimed at enticing more investors to trade HHI shares
"The placement increased our free float. It also strengthened our balance sheet," he said.
HHI, which has a portfolio of toll properties that also includes the West Delta expressway between Guangzhou and Zhongshan via Shunde in the Pearl River Delta, is facing the challenge of a new toll policy in China.
The central government has cut road tolls and waived them during public holidays and credit rating agency Fitch forecast the policy changes will erode HHI's earnings before interest, depreciation and amortisation (ebitda) by 15 per cent in the fiscal year to June 30 next year, 2013.
The policy, which is aimed at encouraging mainlanders to travel and spend during holidays, generated chronic traffic jams during the Mid-Autumn Festival and National Day holidays last month.
It also prompted Fitch to downgrade Hopewell Holdings's debt to BBB-minus, which puts it on the borderline between investment grade and speculative grade paper.
HHI is meanwhile on track to complete the third phase of the West Delta route between Zhongshan and Zhuhai, which is to open in three months.
"During the credit crunch of 2011 in China, we were able to continue our work because of the bond issues," Thomas Wu said.
"By issuing bonds, we could signal to construction teams that they did not need to worry about paying contractors. Certainly we had concrete benefits from yuan bonds."
HHI's total investment in the West Delta's 38 kilometre expressway is 5.6 billion yuan, according to its website.
"Yuan has been the major currency for our business since the beginning of our highway investment. When we started building the Guangzhou-Shenzhen Superhighway 20 years ago, all the bills were paid in yuan but we had to convert that from US and Hong Kong dollars," Wu said.
By issuing bonds and shares in yuan, HHI can inject equity and loans in yuan directly into its mainland projects.
On his home turf in Hong Kong, meanwhile, Gordon Wu is tackling the second phase development of Hopewell Holdings' retail-cum-hotel project called Mega Tower.
Last month Hopewell Holdings took control of the 1.09 million square foot site in Wan Chai by paying a land premium of HK$3.73 billion after settling the deal with the government and shaving the number of proposed floors from 93 storeys to 55.
It also agreed to halve the number of hotel rooms to 1,024, and offered to improve transport facilities in the area.
The concessions came after public complaints that the original tower would block views and cause traffic congestion.
Construction is scheduled to start by the end of this year. After its completion, due in 2018, Kim Eng Securities estimates the project will be worth HK$18 billion compared with Hopewell Holdings' estimated investment cost of HK$9 billion.
But ratings' agency Fitch said although Hopewell Holdings enjoyed stable cash flows from its property portfolio and HHI's toll road revenue, the group would significantly increase its debt to finance the Mega Tower project.
Early next year, Hopewell Holdings will launch the Lee Tung Street redevelopment project in Wan Chai, offering 1,300 residential units with an average size of 562 square feet per unit, said a Kim Eng Securities research report.
The project, a 50-50 joint-venture between Hopewell Holdings and developer Sino Land, is expected to generate HK$11 billion to HK$13.2 billion in sales proceeds, it said.
"Together with its HK$7 billion cash and available financial resources, Hopewell Holdings will be able to maintain its 50 to 60 per cent dividend payout without turning to other fund-raising activities," said Kim Eng.
Hopewell Holdings' shares closed up 55 HK cents on Friday to end the week at HK$28.90, while HHI's share price edged up one HK cent to HK$4.19.