September 9, 2007 / 1:42 PM / 12 years ago

Sino-Ocean Land to raise up to $1.5 bln in HK IPO

(For an expanded IPO diary, please click <HK/IPOMENU>)

By Kennix Chim

HONG KONG, Sept 9 (Reuters) - Chinese property developer Sino-Ocean Land Holdings Ltd plans to raise as much as HK$11.6 billion (US$1.5 billion) after setting a price range for its Hong Kong initial public offering, sources familiar with the deal said on Sunday.

Sino-Ocean, owned by China’s largest shipping firm, COSCO International (0517.HK), and state-run Sinochem, will kick off a marketing roadshow for its IPO on Monday.

The company, which declined to comment, is offering about 1.5 billion shares, or 33 percent of its enlarged share capital, with a price range of HK$6.45-HK$7.70 each, the sources said.

Sino-Ocean, which focuses on mid- to high-end residential property in Beijing, plans to expand in the Bohai Rim region of northern China, which includes second-tier cities such as Tianjin, Dalian and Shenyang.

Goldman Sachs (GS.N), one of the deal’s sponsors, expects the company to post net profit of 1.72 billion yuan (US$228 million) in 2007, up from 571 million yuan in 2006, thanks to a one-off gain this year. Sino-Ocean’s IPO price range represents 17 times to 20 times forecast earnings.

The company sold its 50 percent stake in Chemsunny World Trade Centre, a Grade-A office property in Beijing, to its parent Sinochem in April, for 945.5 million yuan.

Rivals Beijing Capital Land (2868.HK) and Guangzhou R&F Properties Co Ltd (2777.HK), which have 85 and 48 percent of their land banks in the Bohai Bay region, trade at 17 times and 33 times forecast earnings in 2007, respectively.

Goldman Sachs and Morgan Stanley (MS.N) are sponsoring the offering.

Housing reform, an economy growing in excess of 10 percent a year and rising disposable incomes have driven strong growth in China’s property market in recent years, which has prompted Beijing to impose several steps in order to head off a bubble.

Those cooling measures include enforcement of a land appreciation tax (LAT), which is expected to have an impact on developers including Sino-Ocean.

Beijing published guidelines in January reiterating a LAT policy that had been widely ignored since its introduction in 1997. Chinese developers now have to pay LAT ranging from 30 percent to 60 percent of sales, versus 1 percent charged before.

Sino-Ocean made LAT provision of 83.9 million yuan in 2006. Goldman Sachs expects it could post a 212 million yuan LAT provision in 2007 and any changes in the way LAT is calculated could affect the valuation of the company’s land bank.

US$1=HK$7.8=7.5411 yuan

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