Cheuk Nang shares drop 12.2pc

The shares of small property developer Cheuk Nang (Holdings) fell 12.19 per cent after it proposed raising up to HK$351 million by selling rights shares.

The stock shed 59 HK cents, closing at HK$4.25 yesterday. That was the biggest percentage loss since April 22, 2004, shaving the stock's gain this year to 7.6 per cent.

Cheuk Nang, chaired by socialite Cecil Chao Sze-tsung, proposed selling 87.74 million rights shares at HK$4 each, a 17.36 per cent discount to the closing price of HK$4.84 on September 21. Holders of existing shares are entitled to subscribe to one rights share.

The offer price also represents a discount of about 80.89 per cent to the firm's net asset value of HK$20.93 a share as at the end of June, Cheuk Nang said. Szehope Securities, which is wholly owned by Mr Chao, is the deal's underwriter.

'Given the recent improved equity market conditions, the board considers that it is in the interest of the company to raise equity capital to strengthen the group's financial position,' the company said in an announcement to the stock exchange.

Cheuk Nang will pocket a net HK$341.7 million from the deal and will use HK$330 million for debt reduction. Its debt-to-equity ratio was 96 per cent at the end of June, up from 44 per cent a year ago, according to its earnings report released yesterday.