Wharf Holdings Ltd

Wharf shares jump to record as HK$230 bn property spin-off plan revealed

PUBLISHED : Wednesday, 09 August, 2017, 4:21pm
UPDATED : Wednesday, 09 August, 2017, 10:59pm

Wharf Holdings, one of Hong Kong’s biggest landowners, saw its shares surge 15 per cent on Wednesday after it unveiled plans to spin off its core commercial assets in the city into a separate listing.

Wharf said it was carving out six investment properties in Hong Kong with a market value of over HK$230 billion (US$29.4 billion) into a new entity named Wharf Real Estate Investment Company. They are Harbour City and Times Square – Hong Kong’s two biggest malls in shopping districts – and Plaza Hollywood, Crawford House, Wheelock House and The Murray.

The spin-off proposal has been approved by the Hong Kong stock exchange, but Wharf REIC is still “in the process of preparing its application” for the listing, the company said.

“The reason we want to do a spin-off is to separate the businesses, make it clearer,” Wharf chairman Stephen Ng Tin-hoi said in Hong Kong on Wednesday.

The reason we want to do a spin-off is to separate the businesses, make it clearer
Stephen Ng Tin-hoi, Wharf

Ng said the company had “no intention to raise funds” through the planned spin-off. But this would mean that existing Wharf shareholders will be allocated 1,000 shares of the new listed entity for every board lot of 1,000 shares that he or she owns.

After the demerger, Wharf said it would focus on investment properties and development properties in mainland China, as well as other Hong Kong real estate , logistics, and hotel management.

Shares of the property giant shot up 15 per cent to an all-time high of HK$80.15 in afternoon trading on Wednesday before settling back to HK$79.65 at the close. The company’s market value climbed to HK$242 billion, slightly above the valuation of its six Hong Kong investment properties.

“The spin-off plan helps Wharf unlock value from its mature Hong Kong assets with strong cash flow,” said Raymond Cheng, a property analyst at CIMB Securities. “It’s good timing as Hong Kong’s luxury retail sales are rebounding.”

Cheng added that the surge in share prices reflected investors’ bullish outlook on Hong Kong’s retail market.

It’s good timing as Hong Kong’s luxury retail sales are rebounding
Raymond Cheng, CIMB Securities

Wharf also posted better-than-expected half-year results on Wednesday. Core profit rose 22 per cent year-on-year to HK$7.27 billion, and the company declared an interim dividend of 64 HK cents per share, compared to 0.58 HK cents a year ago.

Total revenue was down by 15 per cent to HK$17 billion yuan due to the slower property sales on the mainland.

Its core business, Hong Kong malls, saw revenue rose 4 per cent to HK$6.68 billion.

Doreen Lee Yuk-fong, Wharf’s vice chairman, expects the rental income for the whole of 2017 to remain stable as the number of mainland visitors have bottomed out.

But she also cautioned that Hong Kong’s retail market still faced a lot of uncertainties, including global economic and political uncertainties, foreign currency movements and terrorist attacks in Europe that could divert global tourism trend.