Shares of Great Eagle Holdings soared 12.19 per cent yesterday as investors speculated the company would hand out generous dividends after the proposed sale of the office tower and retail arcade of its Mong Kok property for HK$12.5 billion.
The stock gained HK$2.95 or 12.19 per cent to end at HK$27.15, beating the 0.53 per cent gain in the Hang Seng Index.
On Thursday, the company announced the sale of its Langham Place office tower and retail arcade to its 48.45 per cent owned Champion Real Estate Investment Trust.
The HK$12.5 billion price represents a discount of 11.8 per cent to the property's HK$14.7 billion appraised value.
Analysts said the proposed sale would help unlock Great Eagle's asset value and narrow the discount to its share price.
'The deal is positive for Great Eagle, if approved by Champion's minority shareholders,' said Lehman Brothers analyst Paul Louie. 'It also puts the company at a net cash position, offering scope for a special dividend.'
Great Eagle would be in a net cash position of HK$2.2 billion after the proposed sale and will probably return some of it to shareholders, as it did when Champion Reit listed.
Great Eagle paid a special interim dividend of HK$5 a share following the sale of a stake in Citibank Plaza to the reit for a listing in 2006.
'We believe the chances of a special dividend payout are high given that the group did so after the Citibank Plaza disposal,' Goldman Sachs analyst Anthony Wu said in a research report.
At yesterday's close, Great Eagle stood at a 43.6 per cent discount to its net asset value of HK$48.15 for the year as estimated by Goldman Sachs.
Mr Louie said the deal was also an opportunity for Champion Reit to broaden its portfolio from a single grade A office building to two properties, and diversify its investments from offices to shops.
He said the deal's pricing was not expensive, taking into account that rents at office and retail properties still had upside potential.
However, shares of Champion Reit fell 4.87 per cent to HK$4.10 yesterday, leading declines among other listed reits, including Prosperity Reit's 0.6 per cent drop to HK$1.64 and Sunlight Reit's 0.04 per cent slip to HK$2.43.
Regal Reit closed at HK$2.07, unchanged from Thursday, as did Rreef China Commercial Trust at HK$3.45. Link Reit rose 0.07 per cent to HK$18.96, while GZI Reit fell 0.3 per cent to HK$2.99.