Underwriters say Vincent Lo's mainland development firm needs to raise more to finance its 30b yuan capital spending Mainland property developer Shui On Land, controlled by Hong Kong tycoon Vincent Lo Hong-sui, will need to raise additional capital beyond its planned initial public offering of up to US$550 million to finance a 30 billion yuan capital spending plan from next year to 2009, the sale's underwriters say in a report. The company, now marketing a share float first planned for June but pulled back due to weak investor response, plans to invest 10.8 billion yuan next year and keep spending at a high level in the next two years, BOC International said. The investment amount is 66 per cent than this year's 6.5 billion yuan. As a result, Shui On Land's net debt and net gearing are expected to rise next year and in 2008, making further fund-raising likely, according to the report. BOC International expects that Shui On Land may need an additional 10 billion yuan from next year to 2009 due to a US$375 million note coming due on October 12, 2008 and investments required for project developments that year and 2009. Although net gearing would fall to 32 per cent this year from 155 per cent last year upon 'the expected conversion of preference shares and others', it would rebound to 74 per cent next year and 78 per cent in 2008, the report said. The company, which has focused most of its investments on Shanghai, returns to market with exactly the same assets included in the original offering, including six projects with a gross floor area of 6.737 million square metres at various stages of development in Shanghai, Hangzhou, Chongqing and Wuhan. The net asset value of Shui On Land's operations is about HK$28 billion. Benchmarking the company to other mainland-listed national developers as well as the overall average and applying a discount rate of 3 per cent to 17 per cent to its net asset value, BOC International values the company at between HK$23.3 billion and HK$27.2 billion. BOC International said Shui On Land was on the verge of recouping a significant amount of its invested capital as projects came to market. The brokerage reckoned that the company's underlying earnings would jump 9.4 times this year to 1.454 billion yuan from 140 million yuan last year, after excluding non-cash accounting expenses arising from the fair value adjustment of stock warrants, a revaluation surplus and deferred taxes. But the bank said profit would drop next year as Shui On Land would not be able to book any sales or profit from its ongoing Shanghai project, Taipingqiao, its biggest and best-known mainland venture. Shui On Land posted net profit of 545 million yuan last year and was expected to make net earnings of 819 million yuan this year, the report said. Sources said Shui On Land would begin marketing its offering next Monday. JP Morgan, Deutsche Bank and HSBC are the joint sponsors and bookrunners.