CKP & LKS’s charity fund to dispose a Shanghai property for RMB15.3bn
Cheung Kong Property (CKP) has just issued an announcement regarding anupcoming disposal of Shanghai Century Link. Shanghai Century Link is anewly-completed commercial property in Pudong in Shanghai. It is 50%/ 50%owned by Cheung Kong Property and its chairman Mr. Li Ka-shing’s charityfund. The two entities will sell the property to a special purpose vehiclemanaged by ARA via the way of company transfer. The valuation for theproperty is RMB20bn (HK$23bn). After netting out necessary adjustments, theconsideration will be about RMB15.3bn (HK$17.6bn). The deal is expected tobe completed in 2017/18 at which the legal title will be transferred. CKPexpects the disposal to generate about HK$6.22bn gain, which will be used asgeneral working capital.
A positive for the counter showcasing CKP’s intention for major asset disposals
We believe the deal is a near-term catalyst for the counter for two reasons: 1)the valuation of RMB20bn is similar to what had been earlier reported mid-2015 (Oriental Daily), and should meet investors’ expectations, 2) the deal is anexample of CKP disposing major assets and realizing its property’s value.Recall that the Center in Central, Hong Kong had also been reported aspotential disposal in recent months (Sing Tao Daily), we believe this deal maybe the first with other potential disposals to follow. CKP now trades at 36%discount to our forward NAV of HK$86.7 with 25% implied upside to our TP.