Joseph Lau sits on paper profit of HK$5b after Chinese Estate deals

Tycoon Joseph Lau Luen-hung has become richer by nearly HK$5 billion in just two days as shares of his company, Chinese Estates, rallied following his decision to buy two properties from it. And he may be looking to make another HK$10 billion with the company also planning to issue a special dividend.

Chinese Estates rose 7.97 per cent to close at HK$23.7 yesterday, bringing the total gain in the stock to 18 per cent in two days since the announcement. With Lau holding 74.99 per cent in the company, that translates into a paper profit of HK$4.79 billion.

Chinese Estates on Tuesday said it would sell to beleaguered proprietor Lau two major properties in Hong Kong and Macau for up to HK$16.3 billion in a bid to remove the uncertainties hanging over the company as a result of its legal tussle with the government of Macau.

The company said in the announcement that the asset disposal would enable shareholders to benefit from a special dividend, without elaborating.

"In previous cases, companies in general have distributed 50 to 60 per cent of the sales proceeds as special dividend," said Ricky Tam Siu-hing, a director at Champlus Asset Management. But the percentage can vary if the company decides to keep in reserve more operating capital, he added.

Assuming the payout is 60 per cent of the HK$16.3 billion Lau paid Chinese Estates for the two properties - commercial space at Silvercord in Tsim Sha Tsui and the upscale La Scala luxury residential development in Macau - Lau stands to pocket a neat HK$9.78. If he does, he would have, in effect, paid only HK$6 billion for the two properties.

Tam said he believed the special dividend would help to reduce Lau's borrowing cost as he was unlikely to buy the two properties in cash.