Laus may buy out Chinese Estates

Parent firm mulls privatising the developer

Mid-tier developer Chinese Estates Holdings, controlled by brothers Joseph Lau Luen-hung and Thomas Lau Luen-hung, said yesterday it might be privatised by its closely held parent company, Chinese Estates Group.

The company's shares were suspended from trading at 2.30pm yesterday when it announced the possible buyout. It did not provide further details.

The shares had risen 3.72 per cent to HK$11.72 before trading was halted. They have climbed 24.42 per cent this year, compared with a 3.91 per cent gain in the Hang Seng Index.

Deutsche Bank analyst Adrian Ngan said the shares were trading at about a 40 per cent discount to his estimated HK$20 per share net asset value for the firm.

'The company probably feels the share price could not fully reflect its value,' he said.

Joseph Lau is the company's largest shareholder with a 47 per cent stake while his brother Thomas owns 6.64 per cent. The Children's Investment Fund, a British hedge fund, is the second-largest shareholder with 7.86 per cent.

Chinese Estates' new property developments in Hong Kong and the mainland had not yet been priced into the shares, said another analyst.

The new projects include a joint-venture site in West Kowloon it won in a land auction as part of a consortium on Monday, the Tung Ying Building redevelopment project in Tsim Sha Tsui and residential and commercial projects in the mainland city of Chengdu.

Chinese Estates owns 15 per cent of the West Kowloon project, which will be developed into luxury residential housing with a gross floor area of 650,684 square feet.

The consortium - Sino Land, Nan Fung Development and K Wah International Holdings - paid a lower than expected HK$4 billion for the site.

Chinese Estates is redeveloping the Tung Ying Building into a shopping centre that is scheduled for completion in early 2010.

In March, the developer bought acquired three development sites in Chengdu, providing a gross floor area of 8.47 million sqft.

Chinese Estates financial controller Lam Kwong-wai said he expected the portion of mainland business to increase to between 30 per cent and 40 per cent of the company's overall portfolio within the next three to five years.

This year, the company plans to launch seven residential projects, including its first in Macau in the second half of this year.

The company said in January that it planned to sell the units for between HK$3,500 and HK$5,000 per square foot.

When completed in 2013, the Taipa Island development will have 3,500 units.

Mr Lau said one of the company's near-term goals was to list a property trust, with a detailed plan to come during the first half.

Underlying profit jumped 92 per cent last year, thanks to higher residential sales and securities investments, the company said in March.

Chinese Estates said its underlying profit increased to HK$2.14 billion from HK$1.11 billion a year ago as turnover more than doubled to HK$4.76 billion from HK$2.27 billion previously.

Unrealised value

Stock trades at a 40pc discount to estimated HK$20 net asset value

The percentage increase in Chinese Estates' share price this year: 24%