Shanghai Real Estate Ltd, a major local developer listed in Hong Kong, is considering a separate listing of its approximately 45.26 percent equity interest in a local joint venture, hoping to raise funds for future projects.

 

In an announcement on the Hong Kong Stock Exchange, Shanghai Real Estate said it intends to complete the separate listing together with its overseas partner, which owns 27.37 percent of the joint venture called Shanghai Jinluodian Development Co Ltd. The company did not name the overseas partner.

 

The separate listing is believed by the market to be aimed at raising money for Shanghai Real Estate's two new land development projects.

 

One project is located in Wuxi, Jiangsu Province, the neighbouring city of Shanghai, and covers an area of approximately 8.6 million square meters.

 

The other is located in Shenyang, the capital city of Northeast China's Liaoning Province and covers an area of about 20 million square meters.

 

The firm didn't clarify where it would list the major part of Jinluodian's assets and didn't offer a definite timetable for the listing. However, local media said the listing "will be done in the United Kingdom, the United States, Singapore, Japan or Hong Kong."

 

"Through the separate listing, a company can solve the problem of capital shortage by financing directly in the stock market," said Ren Zhuang, a stock analyst in Industrial Securities' Shanghai Office. "Shanghai Real Estate needs money to fuel its two new projects."

 

Analyst Yao Yao from Guotai Junan Securities (Hong Kong) also pointed out that the listing of Jinluodian will increase the net booking value and net asset value of Shanghai Real Estate and keep its rating advantageous for the company.

 

Meanwhile, Shanghai Real Estate, together with its overseas partner, is exploring different options in raising funds for Jinluodian prior to the separate listing, to secure and start operations of two new land development projects, said the announcement.

 

As yet, no funds have been raised to start the new projects and no application for listing has been submitted, it said.

 

Early this year, Shi Jian, chairman of Shanghai Real Estate, said nine projects were under construction on the mainland with a gross floor area of some 1.4 million square meters, which can be used for the next five years. Starting this year, he said, the firm would look for opportunities outside of Shanghai such as Wuxi and Shenyang.

 

A Sino-foreign equity joint venture, Jinluodian was established in Shanghai on September 26, 2002, with a registered capital of 548 million yuan (US$70 million).

 

It is principally engaged in planning and developing large-scale new towns in China, including designing master plans, relocating and reselling incumbent residents and businesses, and clearing and preparing land and installing infrastructure. It also develops and manages commercial properties.

 

As disclosed in Shanghai Real Estate's 2005 annual report, the net assets of Jinluodian by 2005 were approximately HK$1.09 billion (US$139 million), and the net profits attributable to different owners and itself were approximately HK$371 million (US$47 million) and approximately HK$168 million (US$21 million) respectively.

 

The property and property-related interests of Jinluodian were valued at HK$8.77 million (US$1.13 billion) by the end of September, 2006.

 

(China Daily December 5, 2006)