SHANGRI-LA Asia's first day of trading on the stock exchange got off to a rousing start yesterday as the shares closed at $6.10, up 24.4 per cent from the offer price of $4.90. Brokers said the increase was not surprising because the stock price increase boosted Shangri-la Asia's price-earnings multiple to 15 times, in line with other hotel stocks. Many investors capitalised on the sharp jump as Shangri-La Asia was the most heavily traded stock, with turnover of $325.4 million. Volume was 53.6 million shares with a trading range of $5.90 to $6.20. The $735 million flotation of Shangri-La Asia, the Hongkong and China hotel arm of the Shangri-La group, was oversubscribed by 108 times. The company will use part of the net proceeds of $697 million to reduce debt by $280 million to $1.8 billion. A further $140 million will be spent to refurbish the Kowloon Shangri-La Hotel. The rest is slated for investment in new hotel projects. The Kuok Group has entered into a conditional agreement to buy the 510-room Golden Flower Hotel in Xian. This property will be offered to Shangri-La Asia. Other investment opportunities are being sought in provinces such as Jilin, Heilongjiang and Guangxi. Shangri-La Asia has an understanding with the Kuok Group that as long as the Kuok Group controls it, the hotel firm will be offered the right to acquire all or any Shangri-La hotel or serviced apartment project in Hongkong or China that might be undertaken by the Kuok Group. The flotation accounted for 15 per cent of Shangri-La Asia's enlarged share capital with 58.7 per cent owned by the Malaysian Kuok Group. Shangri-La Asia, the fifth of the Kuoks' hotel groups to be listed in Southeast Asia, yesterday saw its market capitalisation jump from $4.9 billion to $6.9 billion. The company owns interests ranging from 20 to 100 per cent in eight hotels - two in Hongkong and six in China. All of the hotels are managed by Shangri-La International, which charges a management fee of 2.75 to five per cent of gross operating revenue or profit. Shangri-La Asia's hotels and associated properties consist of 1,284 hotel rooms in Hongkong and 3,342 rooms in China. It also owns apartments, office space and other commercial space. This includes 50 per cent of the China World Trade Centre in Beijing and a 20 per cent stake in the Shanghai Centre, which offer exhibition and convention facilities for the group's hotel guests. Last year, Shangri-La Asia had net income of $222.4 million and turnover of $957.2 million. A recent research report by Sassoon Securities said the company would benefit from a recovery in Hongkong's hotel sector, particularly for high-tariff rooms such as those operated by Shangri-La Asia. Sassoon said the healthy growth in the number of tourists visiting Hongkong would see occupancy rates of high-tariff hotels improve by two percentage points to 80 per cent. The report added that China's aggressive efforts to attract foreign visitors would see a large number of business travellers transit through Hongkong to the mainland. Last year the business travel sector expanded by 27.9 per cent, which provided high-tariff hotels with a big boost. Shangri-La Asia is the first hotel company to go public since 1987 when Mandarin Oriental hit the market after splitting off from Hongkong Land.