Lee Shau-kee's billions unlikely to rally Henderson Land shares

Henderson Land's chairman may plough cash from a stock sale into his property firm but previous purchases have failed to rally shares

PUBLISHED : Friday, 04 October, 2013, 12:00am
UPDATED : Friday, 04 October, 2013, 3:04am

Henderson Land chairman Lee Shau-kee may plough his share of the proceeds from a HK$3 billion stock sale into the property firm at the centre of his empire but that is unlikely to spur a rally of its shares.

Lee, affectionately known as "Uncle Four" by the local press because he is the fourth-born in the family, has been a regular buyer of Henderson stock in recent years, seemingly backing up his view that property stocks are undervalued, even as real estate prices in Hong Kong have been skyrocketing.

He is estimated to have spent more than HK$11 billion to buy around 240 million shares in Henderson Land Development this year. In July alone, Lee is understood to have bought Henderson Land shares worth an estimated HK$8.7 billion in two transactions.

But all that has done little to buoy the stock, which is underperforming its peers. Shares in Henderson Land have actually lost 2.6 per cent so far this year. Only one of Hong Kong's big four property firms - Sun Hung Kai Properties - has done worse, falling 9 per cent.

Property developers have in general not been doing too well in the Hong Kong market lately. Cheng Yu-tung's New World Development is down 1.3 per cent and only Li Ka-shing's Cheung Kong has stayed in positive territory, rising 5 per cent.

Henderson Land said in a statement on Wednesday that it would buy HK$2.96 billion worth of shares of its subsidiaries, including a 1.6 per cent stake in Hong Kong & China Gas and stakes in Hong Kong Ferry, Miramar and Henderson Investment, mainly from Lee (pictured) and his family trust.

According to Credit Suisse, Lee's move could be aimed at "cleaning up" his portfolio. "Cleaning up aside, we believe that Dr Lee can use the HK$3 billion proceeds for: (1) purchasing farmland from Henderson Land for the donation purpose; and/or (2) buying Henderson Land's shares," the investment bank said.

Analysts at BNP Paribas concurred in a research note released yesterday, saying: "Given the cash received from the transactions, we cannot rule out the possibility of Lee increasing his stake in Henderson Land."

They said the acquisitions could increase Henderson's net gearing ratio by 1.4 per cent to 16.4 per cent but potential compensation from a government acquisition of its farmland would lower its gearing ratio.

The property tycoon said in August that he would reach a deal in three months with the Housing Society to donate his own farmland in Yuen Long to provide low-cost homes for young people.

Analysts believe the donation would prompt the government to buy other farmland from Henderson Land in order to develop the infrastructure in the area.