Shares in Shun Tak fell 6.7 per cent yesterday as investors reacted coolly to the company's plan to raise up to HK$1.95 billion in a rights offering.
The ferry operator and property developer controlled by the family of casino magnate Stanley Ho Hung-sun said it will offer three new rights shares for every eight ordinary shares currently held.
The rights shares being offered represent 37.5 per cent of the company's share capital, and will be priced at a steep discount of HK$2.02 apiece, or 35.7 per cent below Thursday's closing price of HK$3.14 per share.
The shares slipped HK$0.21 yesterday following the announcement, to close at HK$2.93 apiece - not far above the two-year low of HK$2.56 per share that the stock touched last October.
Shun Tak said it will raise a minimum of HK$1.65 billion and a maximum of HK$1.95 billion via the offering, and will use the proceeds 'for general working capital purposes and for financing new investment opportunities,' according to a stock exchange announcement.
The company had HK$5.06 billion in cash and bank balances on hand at the end of June last year, the most recent data available, and net current assets of HK$14.34 billion.
Analysts at Citigroup and Credit Suisse, who both rate Shun Tak shares a 'buy,' cut their price targets for the stock following yesterday's announcement to reflect the impact of the discounted price of the rights shares.
Underwriters for the rights offering are HSBC, Platinum Securities and a company called Megaprosper Investments. British Virgin Islands-registered Megaprosper is fully owned by three of Ho's daughters from his second wife, who are directors and substantial shareholders of Shun Tak.
The daughters are Pansy Ho Chiu-king with 51 per cent stake in Megaprosper, Daisy Ho Chiu-fung with 39 per cent and Maisy Ho Chiu-ha with 10 per cent. As an underwriter for a portion of the deal, Megaprosper will collect a commission of between HK$6.4 million and HK$9.5 million, or 27 per cent of the total commission to be paid out by Shun Tak.
The shares will begin trading ex-rights from February 6. The issue becomes unconditional on March 1 and the new rights shares start trading on March 7.