Update | China Overseas Land and Investment to acquire mainland, UK assets from parent company
China Overseas Land & Investment (COLI) yesterday announced a 33.8 billion yuan asset acquisition from its ultimate controlling shareholder, China State Construction Engineering Corporation (CSCECL), after the company reported a better-than-expected core net profit of HK$23.83 billion for last year.
COLI said it has agreed to acquire a chunk of mainland and UK property assets from CSCECL for a total consideration of 1.82 billion yuan and 31.99 billion yuan in loans owned by CSCECL. Shares of COLI closed up 2.84 per cent to HK$23.55.
As part of the deal, COLI plans to issue around 1.69 billion new shares at the price of HK$25.38 each to its direct controlling shareholder China Overseas Holdings. China Overseas Holdings is the direct controlling shareholder of COLI and a wholly-owned subsidiary of the Shanghai-listed CSCECL.
The subscription consideration amounts to HK$42.81 billion, equivalent to about 33.8 billion yuan, which equals the asset consideration and the CSCECL loans.
The assets include a portfolio of 27 property projects in various cities such as Beijing, Shanghai, Tianjin, Chongqing, Suzhou in mainland China and three property projects located in London, providing a gross floor area of about 10.9 million square metres as of January 31, 2015.
The asset acquisition was unveiled as COLI announced a 25.6 per cent rise in its core profits to HK$23.83 billion for the year to December 31, 2014.
“The core net profit is also 5.3 per cent and 5.8 per cent higher than market consensus and our estimate,” said Edison Bian, head of China Property, research department at UOB Kay Hian (Hong Kong).
Its net profit, including property revaluation gains, rose 20.1 per cent to HK$27.68 billion.
Directors declared a final dividend of 35 HK cents a share. Including the interim dividend of 20 HK cents a share brings a full year dividend of 55 HK cents, up 17 per cent from the previous year.
COLI’s gross margin during the period was 32.7 per cent, down from its gross margin of 33.6 per cent in the first half of 2014, but Bian said it was still at a “decent level”.
Its net gearing as at end-14 was 32.5 per cent, which is lower compared to its net gearing of 37.3 per cent as of June 30, 2014. It stays much lower than its peers’ 65-70 per cent average net gearing.
