Sino Land boosts its cash with sale of most of stake in Chengdu property for US$1.34 billion

80 per cent of its holding in The Palazzo residential, commercial and hotel project in the western Chinese city was bought by unit of developer Shenzhen Overseas Chinese Town

PUBLISHED : Thursday, 07 September, 2017, 10:10pm
UPDATED : Friday, 08 September, 2017, 5:50pm

Sino Land has agreed to sell 80 per cent of its mixed property development in the western Chinese city of Chengdu to a Shenzhen-listed firm for HK$10.51 billion (US$1.34 billion), a sale that could help it make new acquisitions.

The residential, commercial and hotel project, called The Palazzo and being built on two sites with a combined area of 244,359 square metres at No. 9, Second Yufeng Road in the city’s Chenghua district, was sold to Wealth Express Development, a subsidiary of Shenzhen-listed Shenzhen Overseas Chinese Town, according to a Sino Land filing to the Hong Kong stock exchange on Thursday.

“The disposal enables the group to realise cash and unlock the value in its investment in the project at fair market value,” the statement said.

Sino said the net proceeds from the sale would be used for working capital. After the completion of the deal, it still retains 20 per cent of the project.

Ahead of the announcement, shares of Sino Land rose 0.6 per cent to close at HK$13.44.

Sino Land, chaired by Singaporean Robert Ng Chee Siong, reported underlying profit of HK$5.5 billion for the year to June, up 3 per cent from a year earlier, thanks to strong property sales.

It said net cash on hand grew to HK$27 billion by the end of June, due to a decline in receivables of HK$1.3 billion and increased property sales.

Sino Land spent at least HK$8.5 billion to acquire nine projects throughout the year.

“We believe the company has been cherry-picking the competitive land market, resulting in an increase in net cash on hand despite the acquisitions,” Wilson Ling, an analyst at CLSA, wrote in a research note.

“The recent capital control measures in China imply a potential decline in competition. Sino Land, the only Hong Kong developer in our covered space with net cash on hand and at such scale, is well equipped to capture the reinvestment opportunities,” he said.