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Denise Tsang

Shares in Hopewell Holdings rose 2.25 per cent yesterday on news of a proposal to spin off the company's lucrative mainland infrastructure portfolio.

Hopewell, the property, hospitality and infrastructure flagship of Sir Gordon Wu Ying-sheung, is seeking the Hong Kong Exchanges and Clearing's approval on the spin-off following an application on April 17.

The company's deputy managing director, Josiah Kwok Chin-lai, anticipated the separate listing could take place within the second quarter of this year.

'I guess a listing division approval will be given in one to two months,' Mr Kwok said yesterday. 'Until we have approval, I am not allowed to disclose details of the spin-off proposal.'

However, he confirmed that Salomon Smith Barney was mandated with the role of sponsor.

Analysts widely welcomed Hopewell's decision to float the group's wholly owned vehicle - Hopewell Highway Infrastructure - on the main board by divesting a 25 per cent stake.

Assets of the vehicle were expected to include Hopewell's five toll-road projects in Guangdong province and, potentially, the proposed HK$15 billion, 29km Hong Kong-Macau-Zhuhai bridge.

'In the short term, the spin-off is positive to Hopewell as it will unlock the embedded value of the infrastructure portfolio and increase the prospect of a special dividend payout,' Nomura International (Hong Kong) analyst Ng Kong-yong said. 'However, in the long run, Hopewell's operating profit will be diluted.'

Mr Ng said traffic of the group's toll roads would continue to rise in the coming years, driven by intensifying economic activities and increasing car ownership.

The infrastructure portfolio would have a net asset value of HK$4.88 billion, assuming the spin-off vehicle was priced at a price-earnings multiple of 10.75 times, an industry average, ING Financial Markets analyst Bill Mok Kwai-piu estimated.

This meant Hopewell's net asset value would be boosted by HK$344 million or 40 cents per share, Mr Mok said.

Of the infrastructure assets, the most profitable was the 122.8km superhighway between Guangzhou and Shenzhen, which has seen the amount of traffic grow 20 per cent annually since it opened in 1994.

Mr Mok said the superhighway, of which Hopewell owned 48.8 per cent, generated 74 per cent of the group's 1.4 billion yuan (about HK$1.31 billion) toll revenue for the six months to December last year.

Other assets included the 45 per cent it owned of the Guangzhou east-south-west ring road.

Mr Ng estimated the pre-tax profit of the infrastructure portfolio would total HK$745 million for the next financial year to June. That would be almost an 18 per cent rise from HK$632 million this year.

The stock finished yesterday at HK$6.80, up 15 cents.



Hopewell shares jump on news of spin-off