Guocoland is selling its integrated mixed-use development, Beijing Dongzhimen (DMZ) project to China Cinda Asset Management for Rmb10.5b. The property developer is expected to book a significant gain of Rmb1.6b ($480m) from the transaction.
The project was acquired in 2007 for ~US$750m and was the subject of a six-year litigation battle in China surrounding ownership rights. The sale comes at a time of great volatility in China due to the depreciation of the yuan and equity market sell-off.
Guocoland had announced in Sep ’14 that some of the lawsuits have been resolved and advised that the remaining cases had no merit.
The sale essentially removes a key overhang on the stock and allows for Guocoland to reduce its outstanding debts. Post sale, Guocoland’s net gearing is expected to almost halve from its present 1.5x to 0.83x.
Aside from lowering its leverage, Guocoland could also use the sale proceeds to scout for investment opportunities around the region as a key potential catalyst.
Adding the estimated gain of $0.405/share to its Mar '15 NAV of $2.63 would give a revised book value of $3.035. At $2.07, the stock is thus trading at a generous 32% discount to post sale NAV.
No comments:
Post a Comment