Wang Jianlin clears hurdle to buy back Wanda’s shares
Shareholders approve tycoon’s quest for higher valuations on mainland bourses for his Hong Kong-listed Wanda
Tycoon Wang Jianlin’s quest for a higher value for his flagship company cleared a hurdle on Monday, setting the pace for one of the biggest moves by a Chinese company to relocate its stocks listing from Hong Kong to the mainland.
Wanda’s shares, which trade at 6.5 times 2015 earnings, could get a price-earnings ratio of as much as 20 times if they were traded on either the Shanghai or Shenzhen exchanges in mainland China, Wang said earlier this year.
“The share prices of small and mid-size mainland China companies have long been traded at a discount and in low volumes,’’ said Wong Chi-man, head of research at China Galaxy International Securities.
Wang in May offered HK$52.80 per share to buy out owners and delist Wanda, offering a 10 per cent premium to its IPO price and a mere 15 months after the developer’s trading debut in Hong Kong. The company’s shares have fallen 5.5 per cent in 12 months, unchanged at HK$51.20 on Friday before trading was halted pending the shareholders’ meeting.
The undervaluation of Wanda’s shares in Hong Kong made him “feel sorry” for shareholders and investors, Wang said in an interview in May with China’s state-run CCTV.
He promised to pay investors who are financing his buyback up to 12 per cent in annual returns if he fails to list Wanda’s shares in either Shanghai or Shenzhen within two years.
Wanda is scheduled to be withdrawn from listing on the Hong Kong exchange on September 20.
An increasing number of Chinese enterprises are waiting in line to relocate their H shares to mainland China, analysts said.
China Evergrande Group, Guangzhou R&F Properties and state-owned Beijing Capital Land are reported to be actively seeking to list on the mainland stock markets.
Galaxy’s Wong said the valuation of Hong Kong stock market is among one of the lowest in world’s leading stock markets.
Unlike mainland stock market, which has a large proportion of local retail investors, Hong Kong market are dominated by international institutional investors, who are bearish on China’s economy outlook.
Hong Kong stock market’s “old economy” image, say property and bank sector’s heavy weight in H shares, has further kept investors away, Wong said.
“Investors now prefer to go listing in Shenzhen or the US,” Wong said, adding that Hong Kong needs to make efforts to lure more innovative companies to list in Hong Kong to change the image.
But some analysts don’t expect a mainland firms exodus from Hong Kong.
“Privatisation process is very complicated and many firms take red chips structure which is a hurdle for them to relocate their business to mainland,” said Carol Wu, head of China and Hong Kong Research at DBS Vickers.
Red chips stocks are the stocks of mainland China companies incorporated outside mainland China and listed in Hong Kong.
Mainland Chinese firms including Wanda is returning at a time China’s stock regulator tightens scrutiny of IPOs to curb speculation on shell companies, Wu said.
“It remains concerns if Wanda could relist on mainland in short-term,” she said.
