Sept. 18 (Bloomberg) -- China Aoyuan Property Group, a southern China developer, is seeking as much as HK$3.64 billion ($467 million) through a Hong Kong initial public share sale, according to an e-mail sent to international institutions today.

The developer, based in Guangzhou, Guangdong province, will sell 700 million new shares at HK$4.10 to HK$5.20 each, the e- mail said. The top end of the range values Aoyuan at HK$11.4 billion, according to Bloomberg News calculations.

``The potential of the Guangdong property market is a big selling point,'' said Francis Lun, general manager at Hong Kong- based Fulbright Securities Ltd. ``Its size is not as big as other first-tier developers but investors will still be interested because of its projects' locations.''

Aoyuan will compete with two other Chinese developers, Sino- Ocean Land Holdings Ltd. and Soho China Ltd., which are seeking a combined $3 billion with Hong Kong IPOs. Aoyuan is trying to lure investors with a lower valuation than its two rivals.

Residential property prices in Guangzhou rose 25 percent in the first half from a year earlier, according to a report by property consultant DTZ.

Aoyuan, founded in 1997, develops large housing complexes, including villas, townhouses, and apartment buildings complete with retail shops, restaurants and clubhouses. It has 11 projects in Guangdong, Jiangxi provinces and Chongqing, and is expanding to the northeastern Chinese province of Liaoning, according to a share sale document distributed to fund managers today.

Soho China

The developer is selling a 31.8 percent stake, said two people with information of the sale. The range values the 10- year-old company at 7.2 times to 9 times its estimated earnings for 2008, or a 4 percent to 20 percent discount to its net asset value, they said, declining to be identified because the information has not been publicly announced.

Soho China, the largest developer in Beijing's central business district, is pricing its shares at 12 times to 16 times estimated earnings for 2008. Chinese property developers listed in Hong Kong trade at 21 times next year's earnings on average, according to a UBS report dated Sep. 8.

Five corporate investors are buying about $90 million worth of Aoyuan's shares in the IPO, according to the e-mail. They include Hong Kong developers Sun Hung Kai Properties Ltd., Wheelock and Company, Nan Fung Group., the Kuok Group, as well as China Cinda Asset Management Co., one of the four state-owned bad debt clearing companies set up in 1999.

Under Construction

Aoyuan has completed 1.1 million square meters of properties and has another 700,000 square meters under construction. It holds 3.6 million square meters of gross floor area for future development, the document said. About 60 percent of its projects are in Guangdong, which borders Hong Kong and was China's richest province by per-capita gross domestic product last year.

Aoyuan's net income jumped 59 percent last year to 299.5 million yuan as sales increased 3 percent, the document said. It forecast profit of at least 542.3 million yuan this year, or 0.25 yuan a share.

The company will use the share sale proceeds to finance construction, pay for land and redeem convertible bonds, according to the document.

Credit Suisse Group and Morgan Stanley are arranging the sale. Godwin Chellam, a Hong Kong-based spokesman for Credit Suisse, and Nick Footitt, a Morgan Stanley spokesman in Hong Kong, declined to comment. Aoyuan officials couldn't immediately be reached at their Guangzhou head office.

To contact the reporter on this story: Bei Hu in Hong Kong at bhu5@bloomberg.net.

Last Updated: September 18, 2007 07:14 EDT