Langham Hospitality Investments begins its public offering of units in a hotel investment trust today, aiming to sell them in the price range of HK$4.65 to HK$5.36.
The sale is expected to raise HK$3.96 billion to HK$4.57 billion. Great Eagle will control and own at least 51 per cent of the managers of the trust after the spin-off.
The forecast distribution per unit from the listing date to the end of this year is expected to be about HK$0.18.
With a possible distribution waiver from Great Eagle, the yield could range between 5.73 and 6.60 per cent, depending on the offer price.
Each lot contains 500 shares, meaning the entry level would range between HK$2,325 and HK$2,680. The public offering ends on May 22 and the units will list on May 30. The trust comprises three hotels in Hong Kong with 1,629 guest rooms.
Lo Ka-shui, chairman of Langham Hospitality and Great Eagle, said yesterday: "I hope the spin-off will help Great Eagle to expand further. Great Eagle will be more aggressive in purchasing hotels and hotel development sites. When they become good yield-assets, we will add them to the trust."
Langham Hospitality Investment chief executive Brett Butcher expected the room rates of the hotels to continue to increase as he anticipated solid demand from tourists and limited future supply.
Bank of Communications International property analyst Alfred Lau said the yield was attractive.
Taking into account the yield offered by high-yield bonds, normally below 10 per cent, the Langham trust will attract investors, according to Lau.
The yield from the Langham business trust will decrease to between 5.3 per cent and 6.1 per cent if parent Great Eagle does not waive the dividend due to it. "Such yield is still comparable to Regal REIT," said Lau.
Lau said yield-hungry investors would like the trust.
Phillip Capital Management fund manager Li Kwok-suen said the yield was attractive but added: "The capital gain potential of the trust is limited in the short term."
Li said the valuation of the hotels was high but acceptable given the high yield offered.