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1. Railway merger pushed to cut deficit

2. New look urged at shelved Lingdingyang Bridge proposal

3. Individual sellers face price squeeze

1. Railway merger pushed to cut deficit
Staff reporter, The Standard 4 October 2002

The government wants to speed up the merger of the MTR Corporation and Kowloon-Canton Railway Corporation to help sell shares in the subway operation and cut the budget deficit.

The share sale was originally planned for this year but will now occur next fiscal year, sources said, adding that the merger would improve the financial strength and appeal of the MTRC to investors.

``KCRC has net cash, which can boost MTRC's financial position,'' Kim Eng Securities analyst Mark Po said. ``How the companies perform after the merger depends on the government's regulatory environment on such things as autonomy on fares.''

The government hopes to reduce its deficit, which amounted to HK$56 billion for the five months ending August, by selling MTRC shares.

Early projections of raising HK$15 billion from the sale are likely to have been derailed by the battering the stock market has taken. The government reaped about HK$10 billion from the previous sale two years ago when MTRC was listed.

Shares of MTRC have fallen 11 per cent this year but closed up 1.11 per cent yesterday at HK$9.10, compared to the initial share offer price of HK$9.38.

A government study on the merger would be finished this month, a spokesperson for the Environment, Transport and Works Bureau said, quoting the bureau's Secretary Sarah Liao.

The two railway companies combined have 12,400 staff and HK$180.6 billion in total assets as of the end of last year. Analysts said the merged unit could cut staff to save costs. Earnings would also be enlarged after the merger, they said. MTRC earned HK$4.2 billion last year while KCRC earned HK$2.4 billion. However, analysts said it was difficult to assess the impact of a merger on the two companies at this stage as no details had been announced.

``We don't know whether it's a merger or takeover, [what] the pricing is or how many shares of the combined entity are to be sold to the public, so it's too early to tell at this stage,'' Dao Heng Securities analyst Eric Yuen said.

Meanwhile, the MTRC has invited 16 developers to bid for a HK$6 billion property project above its Tiu Keng Leng station. The development will comprise 1,676 apartments and a 16,800 square metre shopping mall in the first phase. Another 2,096 apartments will be built in the second phase.

The winner of the bid will have to pay HK$770 million to MTRC to reimburse it for work on the foundations and structure of the shopping mall complex.

It will also need to pay HK$1.03 billion in land costs for the first phase.

2. New look urged at shelved Lingdingyang Bridge proposal
ANTOINE SO, SCMP 4 October 2002

The idea of a bridge linking Hong Kong directly with Zhuhai but missing out Macau should be reconsidered, a cross-border transport study has concluded.

A new look at the possibility of building the Lingdingyang Bridge - named after the group of islands it would cross - is suggested in the study by the Hong Kong-China Relations Strategic Development Research Fund.

Fund chairman and executive councillor Cheng Yiu-tong said: "To put it simply, the best part about this bridge in Lingdingyang is that it will make Hong Kong the first destination for [mainland] tourists."

First raised in early 1980, the Lingdingyang proposal was later taken up by the Zhuhai government. Spanning about 30km, the bridge would have linked Tuen Mun and Zhuhai city directly via the Lingdingyang islands.

But Beijing objected to the proposal as it was considered unfair to leave out Macau, and the Zhuhai government shelved the project in February 2000.

Last year, the chairman of Hopewell Holdings, Sir Gordon Wu Ying-sheung, presented a new bridge proposal to link Lantau with Zhuhai and Macau by separate access. Under Sir Gordon's proposal, tourists and cargo from the mainland could also enter Hong Kong directly.

In recent months, senior Hong Kong officials have publicly backed the need for a bridge linking the territory with the western part of the Pearl River delta. Last week Beijing ordered a study on this by the Transport Research Institute of the State Development Planning Commission.

Asked how confident he was Beijing would reconsider a project it had previously shelved, Mr Cheng said that Hong Kong's stance was important. "If Hong Kong thinks it's a better alignment, I think the central government would value the stance of Hong Kong very much," he said. Dr Chan Yan-chong, an expert in logistics at City University, said the southern route would be better able to benefit the delta because it would make the delta transport loop bigger.

"I think both alignments will benefit Hong Kong . . . but a bigger loop is always better than a smaller loop . . . because more cities could be included."

3. Individual sellers face price squeeze
SOPHIA WONG, SCMP 4 October 2002

Individual owners in Tsuen Wan, Tung Chung and Tseung Kwan O could bear the brunt of new developments and see further declines in their property values.

The three New Territories districts are expected to be among the hardest hit because of a larger than usual supply of new projects.

Analysts said that when the projects came up for sale, individual owners, especially those eager to sell units in the secondary market, would face pressure to cut prices.

Midland Realty sales director Sammy Po said: "The secondary market in Tsuen Wan, Sham Tseng and Tuen Mun along the Castle Peak Road have been pressured since the public launch of Park Island in August.

"The asking prices have fallen by 10 to 20 per cent over the past two months but transactions are scarce."

Mr Po said most recent primary sales were projects nearing completion and which directly competed with the secondary market.

He expected the secondary market in areas with abundant new supply to remain sluggish and prices could fall further.

According to Midland Realty, there was an overhang of about 17,000 unsold primary units at the end of August.

Analysts estimated a further 10,000 to 20,000 unfinished units could be released by developers for pre-sale in the next six to 12 months.

Continuing pressure in Tsuen Wan comes from projects on sale including Bellagio by Wharf (Holdings) in Sham Tseng and Sun Hung Kai Properties' (SHKP) Aegean Coast in Tuen Mun.

Major projects in the pipeline include Cheung Kong's 1,240-unit Caribbean Coast phase two and HKR International's 2,022-unit Coastal Skyline, both in Tung Chung.

In Tseung Kwan O, SHKP and Henderson Land still have about 1,700 units while Nan Fung Development has a 1,440-unit project yet to be launched.

Morgan Stanley analyst Kenny Tse expected the market would take 12 to 15 months to fully absorb the overhang of new units. "In the interim, the pricing power is unlikely to return to property sellers."

But Lehman Brothers analyst Anthony Wu said the secondary market could improve because he believed developers would stop cutting prices when releasing new projects for sale in the coming months.

"There is no developer rushing to offload its development. No one has the need to ease its cash flow by flat sales amid low interest costs," he said.

"In the coming couple of months, we can see the transactions volume [in the secondary market] increase and prices become stable if the developers adopt a stable pricing strategy and release flats for sale orderly."