The share prices of companies targeted as back-door listing vehicles over the past year by mainland property developers have surged as investors punted on big asset injections that might follow from their new parents.
But analysts, who expect the acquisition trend will continue, caution that valuing the shares based on little more than guesswork about what the new owners plan to do with the companies is a highly risky gamble.
"In the short term, prices are influenced more by pure speculation," said Du Jinsong, a research analyst at investment bank Credit Suisse.
The cautions come after high-profile takeovers of locally listed companies by mainland developers. The acquisitions have been aimed at providing a back door to listing in Hong Kong, because access to listing by property companies on the mainland has been blocked by regulators, and liquidity is tight.
In all cases, the acquisitions triggered huge rises in share prices. On April 10, shares in Hengli Commercial Properties surged nearly fivefold to HK$1.95 after the company became a back-door listing for Dalian Wanda Commercial Properties, one of the largest mainland developers.
On Friday, the shares closed at HK$4.50, up 131 per cent from the close on April 10.
On May 9, shares of SPG Land almost doubled to HK$7.14 after an announcement that Greenland Holding Group would become a majority stakeholder in the company. The stock closed at HK$8.39 on Friday.
Other back-door listing vehicles such as Vanke Property (Overseas) and Shenzhen High-Tech also saw prices surging.
Analysts said the quality of the new owners might not necessarily affect the business performance of their listing vehicles. What would matter was the quality and value of the assets they might inject into the companies, and what they planned to do with them.
"The latest share placement of Tonic Industries is an example that illustrates the gap between market expectations and asset injection values," said an analyst who asked not to be named. "The shares were sold at a big discount. That should not be good news to the existing shareholders of Tonic."
On June 19, Tonic Industries, a back-door listing vehicle of mainland-based China Merchants Property, announced a placement of 940 million new shares at HK$1.88 each, representing a discount of about 37 per cent to the stock's close of HK$2.99 on June 18.
Li Kwok-suen, a fund manager at Phillip Capital Management, said: "Market expectations are always higher than the reality."
Tonic shareholders might have needed to suffer a short-term decline after a sharp rise since the takeover news was announced in May last year when the share price was below HK$1, Li said.
Du said: "It is hard to value back-door listing vehicles."
If asset injections into the listing vehicles were much smaller than expected, the prospects would vary, he said.
Alfred Lau, a property analyst at Bocom International, said investors should wait for the first batch of asset injections before making a decision on which of the takeover targets to invest in.