China Property

Wanda Commercial shares surge 18 per cent after it proposes privatisation

PUBLISHED : Thursday, 31 March, 2016, 11:54am
UPDATED : Thursday, 31 March, 2016, 6:58pm

Dalian Wanda Commercial Properties saw its shares jump 18 per cent after it proposed a potential privatisation, only 15 months after listing on the Hong Kong stock exchange.

Analysts said the move reflected Wanda’s determination to relocate to a mainland stock exchange, in the belief that its shares were seriously undervalued in Hong Kong -- a perception that is shared by other Hong Kong-listed developers, who might also be tempted to migrate their listings to Shenzhen or Shanghai.

“Wanda feels the share price completely underestimates the value of the company,” said David Hong, head of research at consultancy China Real Estate Information Corp.

A source from Wanda Group, the parent of Wanda Commercial, said the company is focusing on a return to the mainland share markets as its stock price has languished in Hong Kong.

Wanda Commercial,the property arm of conglomerate Wanda Group, controlled by China’s richest man Wang Jianlin, said it is in the “preliminary phase” of considering a voluntary general offer for the company’s H shares which could result in privatisation.

The price will not be less than HK$48, according to its filing to Hong Kong stock exchange on Wednesday, making the total capital needed at HK$31.3 billion.

The developer in November filed a listing application in China seeking to raise 12 billion yuan (HK$14.4 billion).

That was less than one year after its listing debut in Hong Kong on December 23, 2014.

While its share performance has been weak for most of the time, with its last price before the potential privatisation announcement at HK$38.8, 19 per cent below its offering price, and a 44 per cent discount from its NAV, according to HSBC.

Wanda Commercial is not the only company in the real estate sector that believes it is undervalued in Hong Kong. The real estate sector has long been under pressure.

“Unlike A-shares, most investors in Hong Kong are foreign institutions. As the Chinese economy outlook is not good, it weighs on the real estater sector,” said an investment bank property analyst.

Raymond Cheng, Property Analyst at CIMB Securities, said Hong Kong’s stock market is no longer attractive for mainland developers.

Ample domestic liquidity under the central government’s policy support, have lured developers to shift to mainland financing channels, he said. The weak H-share performance and the yuan’s devaluation were also factors, he said.

“They gain much more recognition from domestic investors,” said Cheng.

He added that developers can obtain a price to earning ratio of 15 to 20 in mainland, compared to only 5 to 6 in Hong Kong.

CRIC’s Hong said there were quite a few real estate companies also studying privatisation.

Mid-sized Goldin Properties last year proposed a possible privatisation, however the chairman decided later not to proceed.

Cheng said holding dual listing platforms involving Hong Kong and mainland shares would be ideal for developers.

“You never know when the mainland will close the financing channel,” he said.

Wanda Commercial’s sharesclosed at HK$45.95 in Hong Kong on Thursday.