Sun Hung Kai Properties Ltd., Hong Kong’s second-largest developer, said it may raise as much as HK$22.2 billion ($2.9 billion) from issuing convertible warrants to buy land in the city.
The company is interested in most Hong Kong sites that will come up for sale and sees many opportunities for land acquisitions in the next two to three years, Co-Chairmen Thomas and Raymond Kwok told reporters in Hong Kong yesterday after Sun Hung Kai announced first-half earnings.
Property prices, which have more than doubled since the start of 2009, may drop as much as 20 percent this year on expectations of rising interest rates, according to Standard & Poor’s. The government will sell land this fiscal year that could yield 11 percent more private homes, as it seeks to bring down prices in the world’s most-expensive residential market.
“There are a lot of opportunities to bid for land in the coming two years,” Raymond Kwok said. “We are active in land acquisition and the competition is tense as many mid and smaller developers, and Chinese developers hold optimistic views on land prices in Hong Kong.”
The developer booked a lower profit from apartment sales as the government maintained measures to prevent a bubble. Underlying profit, which excludes property revaluations, fell 8 percent HK$10.6 billion for the six months ended Dec. 31, the company said yesterday. That compares with the HK$10.05 billion median estimate of four analysts surveyed by Bloomberg.
“The market sentiment has not been easy for developers, and Sun Hung Kai didn’t complete many major projects in the first half,” Joyce Kwock, a Hong Kong-based property analyst at Credit Suisse Group AG, said before the announcement. “With its plan to market projects in the next months and portfolio of different types of properties, the developer should have a better second half of the year.”
The developer will supply projects every month this year, company Deputy Managing Director Victor Lui said.
The stock rose 0.2 percent to HK$99.30 in Hong Kong yesterday. Sun Hung Kai’s shares are up 1 percent this year after losing 15 percent last year.
Sun Hung Kai will issue one bonus warrant for every 12 shares held, which entitles holders to subscribe to one new share at HK$98.60 each, according to a separate statement. The new shares will represent 7.69 percent of the enlarged capital upon full subscription.
The Kwok family will convert their portion of the warrants issue into shares, Thomas Kwok said.
Sun Hung Kai will actively bid for every mid- and big-size plot that comes up for sale in Hong Kong, Raymond Kwok said. The government will sell land for as many as 15,500 private homes for the fiscal year ending March 2015, up from the 14,000 units expected this year, Financial Secretary John Tsang said in his budget speech this week.
China’s land prices are starting to be expensive and the company will focus on current developments, Thomas Kwok said. The developer paid 21.8 billion yuan ($3.5 billion) for a site in Shanghai in an auction in September, a record for the city.