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SCMP Reporter

China Resources Land, a red-chip housing developer whose shares have outperformed the Hang Seng Index this year, is raising  as much as US$513 million from a share placement to fund acquisitions and add to its land bank.

The company, which is joining a long list of  firms selling shares as the Hong Kong market  climbs to record highs, is offering investors an indicative range of HK$9.81 to HK$10.02 per share, according to a term sheet sent to investors.

That represents a 4 per cent to 6 per cent discount to the HK$10.44 at which the shares traded before they were suspended  yesterday.

China Resources Land plans to sell 400 million shares,  10.7 per cent of  its enlarged share capital. The sale could raise between US$502 million and US$513 million. Credit Suisse is arranging the transaction. The bank declined to comment.

Shares of China Resources Land have risen 12 per cent this year. The Hang Seng Index, which briefly broke through 21,000 points for the first time yesterday, has risen 4.7 per cent by comparison.

Proceeds from the sale will go to  buying  assets from the company's mainland parent, paying off HK$2.2 billion of outstanding land premiums and the acquisition of land.

China Resources in November said that it had bought land worth HK$2.7 billion in Beijing and Chengdu from  China Resources Holdings, its mainland-based parent.

The Hong Kong-listed subsidiary said at the time it would pay HK$1.5 billion in cash and issue HK$1.2 billion of stock to  its parent.

If the parent  injected its entire land bank of 4.9 million square metres of gross floor area, China Resources Land's net asset value would rise HK$2.29 per share,  UOB KayHian said in a research report.

The acquired land  comprises three million sqmetres of gross floor area. The company bought  an additional 2.6 million sqmetres of land in auctions last year. China Resources Land has 9.1 million sqmetres of gross floor area, up from the 3.6 million sqmetres  at the end  last year,  UOB KayHian  said.

About 90 per cent of the  land bank is due  for residential development and the remaining 10 per cent is for investment property.

The  gross margin  should rise 25 per cent this year and 29 per cent  next as China Resources Land phased out old projects and property prices  rose further, UOB analyst Johnson Hu said in the report.

The company owns land in nine mainland cities including Beijing, Shanghai and Wuhan.

China Resources last raised funds through a placement in January  last year when it raised HK$1.1 billion.

Last week saw the two largest placements this year when Shimao Property Holdings and controlling shareholder Hui Wing-mau raised HK$5.5 billion while rival developer Greentown China Holdings raised HK$2.3 billion.

Those deals were followed by the HK$1.72 billion raised by Citic Resources Holdings  and a HK$1.46 billion placement  by Lee & Man Paper Manufacturing.



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