Li Ka-shing’s Property Spin Off Debuts at HK$70 in Hong Kong

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Li Ka-shing
Cheung Kong Property Holdings Chairman Li Ka-shing. Photographer: Tomohiro Ohsumi/Bloomberg

Cheung Kong Property Holdings Ltd. closed at HK$74.10 on its first trading day in Hong Kong after being spun off from billionaire Li Ka-shing’s conglomerate.

That’s 5.9 percent higher than the opening price of HK$70 and compares with a target price of HK$88 set by Deutsche Bank AG. Jefferies Group LLC gave a target price of HK$80 while CLSA put it at HK$74.

CK Property combines real estate assets of Li’s two main companies, which merged into CK Hutchison Holdings Ltd. last month in the biggest reorganization of his corporate empire. The real estate unit is now the second-biggest landlord in Hong Kong after Sun Hung Kai Properties Ltd., with total assets valued at HK$420.1 billion ($54.2 billion).

“CK Property is a key beneficiary” of a strong residential market in Hong Kong, Deutsche Bank analysts Jason Ching and Tony Tsang said. It has the second-largest inventory of available-for-sale homes in the city this year, they wrote in a note Wednesday.

More than 60 percent of CK Property’s net assets are in Hong Kong, including Li’s flagship Cheung Kong Center, and 32 percent are in mainland China, according to JPMorgan Chase & Co. The developer is one of the biggest sellers of new homes in Hong Kong, selling out two residential projects already this year. It has a 2015 sales target of HK$30 billion.

“It’s hard to see the property market drop today,” Li told reporters on Wednesday. Construction costs in Hong Kong are double those in the U.S. and Canada, he said.

Net Asset Value

Li’s family and trust retain the biggest stake in CK Property of 30.2 percent.

CK Property’s closing price represents a 21 percent discount to analysts’ median net asset value estimate of HK$93.8 per share compiled by Bloomberg. That compares with an average 35 percent trading discount to net asset value for CK Property’s peers, according to JPMorgan Chase.

CK Hutchison, which holds Li’s non-property assets from ports to telecommunications, fell 4 percent to HK$118. The benchmark Hang Seng Index gained 0.7 percent.

Li unveiled plans to restructure his former company Cheung Kong Holdings Ltd. and its unit Hutchison Whampoa Ltd. in January, saying it would allow investors to more easily choose between a regional property business and expanding global assets in more than 50 countries.

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