PLAYMATES International, born again as a property group after spinning off its Ninja Turtle-making toy arm, is set to pay $1 billion for Shui Hing House, the Nathan Road department store. Playmates has signed a deal to buy the property from owner-occupier Shui Hing, conditional on shareholder agreement being obtained by the vendor and other conditions. The deal has a lease-back clause which will see Playmates let part of the building back to Shui Hing until March 1996 for $500,000 including charges for air-conditioning and management fees. Shui Hing holds the basement to the fourth floor for the Shui Hing department store. The company also occupies parts of the ninth and 11th floors, and the whole of the penthouse floor. The parts of the building not occupied by Shui Hing are let to tenants for terms of between two and three years, all of them expiring between March 1994 and January 1997. Playmates will take over these leases on completion. Shui Hing showed interim profits sharply up for the six months ended August 31, achieving a profit after tax of $9.88 million compared with $2.15 million for the same period a year earlier. All but $13,000 of the profit came from a single exceptional item: the sale of a 7.15 per cent stake in Tin Fok Holding Co, a group set up to invest in a 20-storey hotel and car park project in Macau. The sale of the stake produced a pre-tax profit of $9.82 million for Shui Hing. Announcing these figures last month, Shui Hing chairman Daniel Koo Shing-cheong warned that the group's retail operations were ''seriously affected by stiff competition in the Hong Kong market, high staff overheads and turnover, an increase in shop rentals and a generally softer consumer market''. The retailer lost money for the year to last February, turning in an after-tax loss of $7.7 million despite a marginal increase in turnover. The group is concentrating its strategy on breaking into the China retail market. Shui Hing yesterday received a $50 million deposit for the deal, and Playmates said a further $100 million would be paid after it had signed the sale and purchase agreement. The balance would be paid on completion, which was expected to be before July 31, 1994. Playmates, which earned billions of dollars through the lucrative franchise to make Teenage Mutant Ninja Turtles toys, has just undergone a complex and controversial restructuring. The previous core business of toy manufacturing was spun off under the name Playmates Toys Holdings, a fresh company with no track record and an unpredictable post-Turtles future. The rump of the business kept the Playmates International name and saw an injection of property belonging to the controlling Chan family, to produce a $1.38 billion paper company. Injection of Chan family assets has yielded the family a profit of $608 million in shares. Analysts were divided over the restructuring plan. Some saw the split as a means of unlocking value in the group and a logical separation of business interests. Others were concerned that property valuations were at net asset value in a sector where most valuations are at a discount to net asset value.