bodyType

customContents

entityId

entityUuid

articlePageQuery

filter

article

articleBaseAdvertisingInfoArticle

articleListArticle

articleSeoArticle

hooksArticleAcknowledgementGateOverlayArticle

hooksTrackPageViewArticle

hooksContentInterestArticle

articleLinkingDataContent

hooksAmpRedirectArticle

articleSchemaContent

liveArticle

advertZone

sentiment

contentLock

topics

types

sections

paywallTypes

createdDate

publishedDate

urlAlias

moreOnThisArticles

sponsorType

commentCount

authorLocations

authors

corrections

displaySlideShow

multimediaEmbed

printHeadline

seriesContainer

articleSpeeches

socialHeadline

headline

images

flag

firstTopic

glossary

flattenTypeIds

image

relatedLinks

relatedNewsletters

__typename

sponsor

pdfFiles

seriesReverseOrder

series

disableOffPlatformContent

published

updatedDate

summary

subHeadline

body

keywords

readingTime

customTimezone

liveContents

SCMP Reporter

Red chip Guangzhou Investment (GZI) is looking to the Panyu district of Guangzhou for growth after agreeing to buy a property development company from a commercial arm of the city's municipal government.

GZI chairman Liu Jinxiang said yesterday he saw good prospects for the future of the Guangzhou property market, including the Panyu area.

His comments came after the company agreed to buy Guangzhou City Construction from parent Yue Xiu Enterprises (Holdings) for about HK$5.01 billion.

The price represented a 40 per cent discount to Guangzhou City Construction's HK$8.35 billion net-asset value, according to sources.

The red chip is focusing increasingly on property development which will account for 80 per cent of its asset value when the deal is completed.

Most of state-owned Guangzhou City Construction's projects are in prime areas of the Guangdong provincial capital.

Mr Liu said Guangzhou City Construction could expect a 'significant gain' as it had bought about 266 hectares of land in Panyu well before the government announced its plan to integrate Panyu into Guangzhou.

The integration was aimed to expand space for the densely populated Guangzhou city centre.

Guangzhou City Construction will build villas in Panyu, which will become a second city hub.

The company has made a total investment of 1.6 billion yuan (about HK$1.49 billion) in property projects, with a construction area totalling 1.56 million square metres.

It expected revenue to reach 1.3 billion yuan next year after the sale of 240,000 sq metres in gross floor area.

Mr Liu said the property sector growth would be driven by the huge market potential, the growing purchasing power of mainland people and the private-ownership scheme.

'Only three people out of 100 in Guangzhou own flats, compared with 12 in Hong Kong . . . this shows the market potential,' Mr Liu said.

Guangzhou City Construction is one of two property assets which the Guangzhou government had earlier given to Yue Xiu as part of the latter's debt-restructuring plan in October.

Last year, Yue Xiu reached an agreement with creditor banks to restructure HK$4.9 billion of unsecured debt with a five-year secured refinancing loan after the company was hit by tight credit caused by the 1997 financial crisis and the collapse of Guangdong International Trust and Investment, the financial arm of the Guangdong government.

Mr Liu said the remaining property asset, a holiday resort, had yet to achieve sufficiently satisfactory results to be injected into the red chip.

Yue Xiu's stake in Guangzhou Investment will increase to 67 per cent from 44 per cent when the deal is completed.

Meanwhile, GZI has sold its 100 per cent stake in a cement-making business and the entire 36.84 per cent stake in telecommunications equipment maker Guangzhou Jin Peng Holdings to Yue Xiu to partially fund the deal.

The acquisition of Jin Peng in 1999 drew scepticism of analysts, who questioned the direct short-term benefits to the red chip and regarded the deal as too expensive.



Good prospects seen in growth potential of Guangzhou market