The Government intends to sell the first tranche of shares in the MTR Corp (MTRC) in the final quarter of the year - later than expected. The sale had been expected to take place in the third quarter. Financial Secretary Donald Tsang Yam-kuen announced in last year's Budget that the Government planned to privatise the MTRC and seek a listing on the stock exchange. A minority stake - valued at HK$30 million - will be sold in two stages, one this year and one next year. The initial public offering (IPO) of the MTRC, the first privatisation of Government assets, is seen as a litmus test for similar plans in the future, as the Government looks for alternative sources of revenue and greater public sector efficiency. Sources cited market conditions as the key reason for the slight shift in schedule. 'August is a quiet month. But whether the IPO will take place in October or November has not been decided,' a source said. The complexity of preparing for the privatisation issue is another reason behind the change. Although preparation for the listing had proceeded well since the Legislative Council passed the MTRC privatisation bill in February, it took time to ready an issue of this size, the source said. An investment banker said that it normally took about three months to finish processing an IPO, while privatisations could take five to six months. Sources added that the Exchange Fund Investment (EFI) - custodian of the government investment portfolio - timetable for selling stocks was an influence on the listing of the MTRC. It is expected that EFI, which is considering offloading more of its stock portfolio via placements or the issue of convertible bonds, will reduce its holdings in September. It is thought the Government wants to keep the two separate if possible. Sources said as there was still some way before the appearance of the MTRC's first tranche, the valuation and amount of shares to be sold in the market had not yet been decided. However, the Government is clear about the location of the listing. It is understood that the Government will list the profitable MTRC solely in Hong Kong, rather than seek a dual listing in the United States as the market had expected. Furthermore, to make the shares more attractive to Hong Kong citizens a number of options were being considered - one of which may involve discounts on MTRC shares, the sources said. The MTRC's valuation would be based on the discounted cash flow method - a widely used method to derive a transport company's valuation. However, in terms of the simpler price-earnings ratio method, the MTRC would sell shares at a ratio not lower than the Hang Seng Index average - which was trading at slightly less than 12 times at present, sources said.