Li Ka-shing's Cheung Kong Property spin off debuts at US$9

[HONG KONG] Cheung Kong Property Holdings Ltd opened at HK$70 on its first trading day in Hong Kong after being spun off from billionaire Li Ka-shing's conglomerate.

It traded at HK$72.95 (US$9.41)at 10.21 am local time. That compares with a target price of HK$88 set by Deutsche Bank AG and HK$80 by Jefferies Group LLC.

CK Property combines real estate assets of Mr 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 (US$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 per cent of CK Property's net assets are in Hong Kong, including Mr Li's flagship Cheung Kong Center, and 32 per cent 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," Mr Li told reporters on Wednesday. Construction costs in Hong Kong are double those in the U.S. and Canada, he said.

Mr Li's family and trust retain the biggest stake in CK Property of 30.2 per cent.

CK Property's opening price represents a 25 per cent discount to analysts' median net asset value estimate of HK$93.8 per share compiled by Bloomberg. That compares with an average 35 per cent trading discount to net asset value for CK Property's peers, according to JPMorgan Chase.

CK Hutchison, which holds Mr Li's non-property assets from ports to telecommunications, fell 1.5 per cent to HK$121.10. The benchmark Hang Seng Index gained 1 per cent.

Mr 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.

BLOOMBERG