Over the weekend, Mideo Real Estate announced a spin-off for its property developer business (PD&S) as a private enterprise; minority shareholders can receive HKD 5.9 per share in cash for each share of HK.3990.
The listed co traded at HKD 3.75 per share last Friday. So the cash payout is 57% more than the share price. The remaining listed co will focus on property management etc.
Is this applicable to many other developers and thus putting a floor?
I doubt it.
3990 is relatively small and controlling shareholder has over 80%. The max cash payout needed is ~1.6bn HKD, or $205mn – this is a small amount and can bed easily handled
Midea Group (a major electrical appliance manufacturer in China) itself is strong and cash-generating, with 33.7 billion rmb profit in 2023. The founder, He Xiangjian, has ~29.6% ownership of Midea Group.
Midea Group is paying over 20bn rmb in cash dividend in 2023. He Xiangjian can get ~6bn rmb, more than enough for the 1.6bn HKD payment calculated in above.
Even there is a price, that’s around 0.33x p/b.
And when 3990 stock was trading at HKD 3.75 per share, it’s at around 0.2x p/b,