The Straits Times Index (SGX: ^STI) has increased by 0.6% from last Friday’s close to yesterday. However, real estate outfit Ying Li International Real Estate Ltd. (SGX: 5DM) has performed much better with a 11.8% gain to end Thursday at S$0.285, making it a big winner for the week.
Ying Li is a property developer based in Chongqing, China. It engages mainly in the development, sale, rental, management, and long-term ownership of high quality commercial and residential properties in major cities of Southwest China.
On 2 September 2014, Ying Li held an Extraordinary General Meeting (EGM) to seek shareholder approval surrounding a deal between the company and Everbright Hero Holdings Limited, an indirect wholly-owned subsidiary of China Everbright Limited. China Everbright is a financial group that provides financial services with specific focuses on fund management and investment business.
Yingli’s shareholders duly passed the resolutions set out in the EGM. With that, Everbright Hero will be investing around S$284.1 million in Ying Li through the subscription of shares and perpetual convertible securities.
Under the share subscription, 381 million shares, comprising 17.51% of the existing share count of Ying Li, will be issued to Everbright Hero. Meanwhile, under the perpetual convertible securities subscription, S$185 million worth of perpetual subordinated convertible callable securities will be issued to Everbright Hero. The securities can be converted to up to 581.8 million new ordinary shares of Ying Li (comprising 26.74% of the company’s existing share count), at an initial conversion price of S$0.318.
The rationale for the move is so that Ying Li is able to “realise its next phase of strong growth”.
China Everbright has an extensive domestic and international network, allowing Ying Li access to a strong pipeline of opportunities in property projects and acquisitions. This will allow the real estate firm to expand into major Chinese cities such as Beijing, Shanghai, Guangzhou, and Shenzhen. When the time is ripe, Ying LI is also looking to expand into Singapore and Hong Kong.
In the future, China Everbright’s retail properties and Ying Li’s mature retail properties may also be brought together to be spun off as real estate investment trusts or business trusts, thereby unlocking shareholder value.
The market took well to the news, gamely adding 3 cents to Ying Li’s shares from last Friday’s close of S$0.255. The firm is currently trading at 12 times its historical earnings and 0.9 times its book value.
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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Sudhan P doesn’t own shares in any companies mentioned.