Shimao Group chairman Wing Mao Hui said on June 8 that Shimao Property intended to restart a shelved hotel spinoff but fell short of revealing a specific timetable for the move.
China Merchant Bank’s analyst Xuansen Wen said it was a completely unexpected statement as Shimao’s hotel operations had never been very profitable. “From the standpoint of earnings, there wouldn’t be much value for Shimao Property to list a hotel spinoff as it wouldn’t raise much capital. However, from a management viewpoint there are advantages of having an independent spinoff to partition separate operations,” he said.
Shimao Property’s hotel operations recorded RMB1.178 billion (approx: US$190 million)in earnings last year. While it represented a growth of 20.3% over 2013, it was mainly a boost from opening new hotels.
Back in 2007, Shimao Group’s Mr. Hui announced plans to list a hotel spinoff in Hong Kong by 2010. He said then that its hotel operations could really become valuable only when it was listed. However, despite all the publicity the project was quetly put on the backburner.
Then in 2011, Shimao Property once again announced it was exploring with the Hong Kong Stock Exchange to spinoff of its five-star hotel assets and list it as a tourism real estate company. Mr. Hui even boasted the listing would raise RMB10 billion (approx: US$1.6 billion) in capital.
However, the much-hyped spinoff still didn’t materialize. By August 2012, the market was rife with rumors that Shimao Property had abandoned its spinoff listing, and was engrossed in negotiations with private equities and potential investors in the hope of getting a better valuation.
Shimao Property had a total of 12 hotels with a capacity of 4,600 rooms as of the end of 2014. Among its properties are Le Royal Meridien Shanghai, Hyatt on the Bund, Hilton Nanjing Riverside, Holiday Inn Mudanjiang, Holiday Inn Shaoxing, Hilton Doubletree Wuhu, Intercontinental Fuzhou and Crowne Plaza Shaoxing.
Unlike other property developers, Shimao Property not only builds its hotels but also its own management teams for its hotel properties. In the second half of 2014, it had its first directly-managed hotel, Yuluxe Taizhou .
That's why its not difficult to comprehend that Shimao property plans to restart its spinoff listing plan rather allocate new shares at a time when the stock market is bullish, bringing higher market valuation.
Mr. Hui explained that the group has always been undervalued, as the share price of the group is not going up in tandem with the overall market, the group would not make share allocation plans.(Translation by David)
