Hui Xian

SCMP's Tom Holland on Li Ka Shing's yuan based IPO. Now Hui Xian could be translated as "return first", in this case it will be making returns to the old fox Li Ka Shing first...

Lots of noise about it based in yuan, but as Tom's points out, it doesn't matter what currency the IPO is in as the assets are in China and priced in the Chinese environment. Each share represents a 'share' of the assets and what currency is used to price it is moot.

According to Hui Xian's offering documents, if the shares are priced at the top of their indicative range, they will pay a dividend yield of 4 per cent.

That sounds like an attractive proposition at first. But for a real estate investment trust that plans to pay out nearly all its net earnings in dividends, it equates to a price to earnings ratio of almost 25 times.

Now, you can argue that Hui Xian's sole asset, its stake in Beijing's Oriental Plaza retail, office and hotel complex, is a mature investment with a steady, low-risk income stream, and so the offering's valuation is justified.

But the pricing still looks steep, especially when you consider that the value of Hui Xian's underlying property assets will deteriorate to zero by 2049, when its joint venture partnership in Oriental Plaza is due to expire worthless.

In contrast, Hong Kong dollar shares in the GZI real estate investment trust, which manages properties in Guangzhou, are currently priced at around 15 times earnings for an indicative yield of almost 6 per cent.