CSI Properties aims to raise HKD394.8m through share placement

CSI’s share price is likely to fall immediately, says OSK-DMG.

CSI Properties (CSI) will raise net proceeds of HKD394.8m through a top-up placement of 1,212m shares. The shares were priced at HKD0.335, an 15.2% discount to their 18 October closing price and close to the lower end of the previously indicative price range of HKD0.33 – HKD0.35. T

OSK-DMG said that the placement will enlarge CSI’s share capital by 14.6% to 9,518m shares. As such, Mico Chung’s (the Chairman) stake, it said, will be diluted to 44.24% from 50.70%.

Here are the implications according to OSK-DMG:

We believe CSI will use the proceeds from the placement to further increase its land bank for Couture Homes, the Group’s luxury residential property arm. We have left our FY3/13 earnings estimates unchanged but have reduced our estimates on: 1) FY3/13F ENAV per share by 6.6% to HKD1.09, 3) Core EPS by 13.6%/13.4% to HKD0.184 and HKD0.181 in FY3/13F and FY3/14F respectively and 4) dividend yield by 0.8ppt/0.9ppt to 5.3%/5.2% in FY3/13F and FY4/14F respectively (based on CSI's 18 October closing price of HKD0.395).

. As the new shares are priced at a significant discount to the market and because of the relatively large share dilution, CSI’s share price is likely to fall immediately after the top-up placement. However, we consider this placement positive in the long term as it will beef up CSI's warchest for further land bank acquisitions. We also believe that further property sales in 2H3/13F would enable the group to realize profits and maintain its i) FY3/13F net profit at HKD1.7bn and ii) attractive FY3/13F yield of 5.3% vs its peers’ average of 3.5%. As a result of the placement, our TP is revised down to HKD0.47, based on the same 57% discount to revised end-FY3/13 ENAV of HKD1.09. Maintain BUY