Record bid for Hong Kong property dents Henderson Land shares
Investors reckon deal could prove financial burden
CHINATSU HAYASHI, NQN staff writer
HONG KONG -- Henderson Land Development saw its share price plunge on Wednesday after the Hong Kong-based property developer agreed to pay a record sum for land in Hong Kong's Central financial district.
The stock briefly touched a low of 48.75 Hong Kong dollars, down HK$1.45, or 2.88%, from Tuesday, a level last seen on May 9.
In the auction for the commercial land, Henderson tendered to pay HK$23.28 billion ($2.98 billion). It was the highest amount ever bid for public land in Hong Kong and was nearly 5% higher than the highest estimate reported by the Hong Kong Economic Journal on Wednesday.
It was the first land auction in Central in some 20 years.
Henderson plans to build an office building on the land by 2022.
Investors are divided over the assessment of the historic deal. Some, including a fund manager at Phillip Capital Management, consider the deal not to be too big a sum for Henderson.
Joyce Kwock, a Hong Kong real estate analyst at Nomura, said in a report to investors dated Wednesday that it will keep Henderson's investment grade unchanged at neutral, the middle of its three ratings.
On the other hand, she gives a buy rating to its four major competitors, including Sun Hung Kai Properties and Cheung Kong Property Holdings. Kwock considers Cheung Kong, which holds four properties in the vicinity, to be an "indirect beneficiary of this deal," as those properties are undervalued and "should help to lift up the valuation of The Center," which the company is keen to sell.