Mainland market 'offers more growth potential, broader financing channels'
Dalian Wanda Commercial Properties Co on Monday gained shareholder approval to delist from Hong Kong's stock exchange via a $4.4 billion buyout, said a filing the company sent to the Hong Kong Stock Exchange late Monday.
Experts noted that it is a crucial step in the developer's plan to seek higher valuations through getting listed on the Chinese mainland market in the coming years.
Shares of Wanda Commercial were suspended from trading on Monday pending the vote, and will resume trading from 9 am Tuesday, the filing said.
After the deal, which is set to be the bourse's biggest buyout, parent Dalian Wanda Group's Chairman Wang Jianlin aims to get the property unit listed on the Chinese mainland within two years, Reuters reported on Thursday.
In May, Dalian Wanda Group offered HK$52.8 ($6.8) per share to buy out the Hong Kong-listed property unit, with the aim of taking the company private before getting it relisted in mainland, according to media reports.
Wang said the key factor in taking the developer private was the heavy undervaluation of the company, news portal yicai.com reported on Monday.
About 35 percent of Wanda Commercial's net profit comes from the leasing of its fixed assets, and the company's leasing business accounts for one-third of its revenue with annual growth of 5.2 percent, Wang was quoted as saying in the yicai.com report.
Wang believes that the market should not value Wanda Commercial as simply as a property company, the report said, noting that the valuation being less than its net assets is "intolerable."
Valuations for commercial property companies are generally three times greater in the mainland than those in Hong Kong, Reuters said.
Listing on the domestic bourse means that investors will be more familiar with Wanda and will see Wanda's advantages in property development, and thus they should be able to give it a higher valuation, Wang Yongping, secretary-general of the China Commercial Real Estate Association (CCREA), told the Global Times on Monday
"Indeed, the mainland capital market will offer more new growth opportunities for the developer and help it broaden its financing channels," Wang Danqing, a partner at Beijing-based consultancy ACG, told the Global Times on Monday.
Most of Wanda Commercial's real estate projects are in the mainland market where will enjoy a sounder growth environment compared with the Hong Kong market, Wang said.
Wanda's rapid expansion in the domestic market also means the majority of its commercial assets are still developing and their rental returns are unimpressive, noted Wang.
And Hong Kong investors treat returns as a serious factor in making investment decisions, said Wang, secretary-general of the CCREA.
Wanda Commercial Properties got listed on the Hong Kong stock market on December 23, 2014, raising $3.7 billion.
It can be said that Wanda's performance in the Hong Kong market was worse than it had expected, noted Wang Yongping.
Generally, Hong Kong investors do not give high valuations to mainland-based property companies listed on the Hong Kong bourse, according to Wang.
Investors in Hong Kong tend to be preoccupied by the uncertainties caused by frequent policy shifts between loosening and tightening and potential bubbles, he said.
The company's shares will be -delisted from the Hong Kong bourse on September 20, domestic news portal jiemian.com reported on Monday.
