Analysts warn that overly aggressive land acquisition could erode margins
Mid-sized Hong Kong developer Sino Land has sold $2 billion in convertible bonds, taking advantage of a rally in its share price and the turnaround in the local property market.
The transaction is the latest in a series of cash calls by Hong Kong property companies, which are eager to build their war chests while interest rates are still low.
Analysts said the bond gives Sino Land low-cost capital, but cautioned that overly aggressive acquisition of land could lead to an erosion of its profit margin. The convertible bonds, with a 1.625 per cent interest rate and a five-year maturity, can be converted into Sino Land shares at $9.225 each - representing a premium of 29 per cent to Tuesday's closing price.
The conversion price also represented a premium to the company's net asset value, which analysts had estimated at between $6.55 and $8.95 per share.
Following the bond issue, Deutsche Bank said it had raised its estimate of the company's net asset value to $9.30 from $6.55.
The proceeds from the bond issue will be used for land bank replenishment and general working capital, the company has said.
