Shui On Down Most in 4 1/2 Years on Rights Plan: Hong Kong Mover

Shui On Land Ltd., the Chinese developer controlled by Hong Kong billionaire Vincent Lo, was set for its biggest decline in four and a half years after profit dropped and the company announced a rights issue.

The shares sank 13 percent to HK$2.89 as of 1:01 p.m. in Hong Kong trading, the most since Oct. 27, 2008. Macquarie Securities Ltd., JPMorgan Chase & Co. and DBS Vickers downgraded the shares. The company said March 28, before the Easter holiday break, that it will issue as many as 2.25 billion shares at HK$1.84 each. Underlying profit fell 87 percent to 201 million yuan ($32 million) in 2012 from a year earlier, prompting Chairman Lo to apologize for the disappointing results.

“We believe there are alternatives in raising capital,” Macquarie analysts led by Jeffrey Gao wrote in a note to clients today, citing land sales, price cuts or the formation of joint ventures with local partners.

Macquarie downgraded the shares to underperform from neutral because of Shui On’s poor results, potential execution risks and tight cash flow, Gao said.

The company warned in January that full-year profit will decline “significantly” because it completed fewer properties last year compared with 2011.

The developer said in January it will spin off the unit that developed the Xintiandi restaurant and bar district to focus on development. Shui On holds about 50 percent of China Xintiandi, which started operation last month, and is looking for strategic investors for the rest, Lo said.

The Hong Kong stock market was shut March 29 and April 1 for the Easter holiday.

— With assistance by Bonnie Cao

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