ANALYSTS reacted positively yesterday to CITIC Pacific's 50 per cent acquisition of HKR International's interest in Discovery Bay. Initial estimates suggested the purchase, costing $3.4 billion, would enhance earnings per share and the value of assets per share. As an acquisition, the size of the deal for the mainland-listed conglomerate was of a modest size, representing 10 per cent of gross assets upon completion. For CITIC the purchase of the interest in Discovery Bay on Lantau Island, HKR's main asset, was regarded as a long-term strategic move. At four or five times earnings, the acquisition was seen as a good buy for the group. Analysts said HKR's Cha family saw CITIC as a major strategic partner which made the building of the rumoured 420-metre tunnel link with the planned North Lantau Expressway in the future more likely. ''With CITIC's size and influence there should be no problem negotiating with the Government or raising the finance for such a project,'' said a broker. Obviously, both will benefit from the construction of the airport at Chek Lap Kok whether it is built by 1997 or delayed for a year or two. The HKR asset is expected to contribute some $680 million this year and $488 million in 1995, according to rough estimates. HG Asia analyst John Pinkel said the financing of the deal would increase CITIC's gearing. On completion of the deal, gearing would stand at 28 per cent, excluding off-balance-sheet financing for the Hongkong Telecom injection last year, or 40 per cent including the cost of the Telecom shares. Irrespective of the criteria used to work out gearing, Monday's deal has led analysts to speculate that CITIC might be interested in raising cash in the future to pay down debt and reduce gearing. On January 8 last year, CITIC Pacific issued 551 million shares at $13 a share to raise $7.1 billion, which paid for the injection of a 12 per cent stake from parent China International Trust and Investment Corp Hong Kong into the listed vehicle CITIC Pacific.
