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Business: Hong Kong vs. Singapore, Cont'd
In this installment, City Developments gets an Internet strategy
By ASSIF SHAMEEN

June 30, 2000
Web posted at 8:30 p.m. Hong Kong time, 8:30 a.m. EDT


A while back, every large bricks-and-mortar company in Hong Kong was rolling out its Internet strategy. Make that every large property company. From Li Ka-shing's Cheung Kong to Sung Hung Kai to New World Development and Henderson Land, the race was on to roll out the biggest Internet company in the SAR. Just as developers try to outdo each other by building the tallest tower, the contest in Hong Kong was to see who could spend more money on Internet. At that time, the big corporate players in Singapore were quiet. Now as the fever has died down in Hong Kong (thanks to cold water from Nasdaq), Singapore is starting to stir.

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Witness the latest headlines on the restructuring of Singapore's largest listed property company, City Developments. CityDev, as the firm is known, is the third largest landowner in Singapore after the government and the family of Ng Teng Fong (whose affable son Robert Ng runs Hong Kong's Sino Land). It may not be the No.1 landowner in the island-republic, but CityDev is largest listed property player. It is part of the Singapore Hong Leong group run by the Kwek family (not to be confused with Malaysian Hong Leong Group, run by their cousins Queks).

Hong Leong Singapore and CityDev have been criticized for not having much of an Internet strategy. Some observers dubbed CityDev a dinosaur -- a brontosaurus whose stock price continued to be hammered even as old economy stocks started to come back. Of course, one reason for its laggard status has been the fact that the immediate prospects for Singapore property aren't very bright. There are just too many condos and more supply on the way -- with hardly a buyer (at these prices) in sight. But another reason is that lack of Internet excitement.

CityDev is among the world's biggest hotel owners. Its hotels are housed under the Hong Kong-listed company CDL Hotels International, which in turn owns the London-listed Millennium & Copthorne Hotels. M&C has 117 hotels with 31,000 rooms, mainly in Europe, Hong Kong, Singapore, Taiwan, Australia, New Zealand and the U.S. (In New York, M&C owns the Plaza Hotel in a joint venture with billionaire Saudi Prince Waleed.) It recently purchased a string of four-star American hotels from Regal Hotels of Hong Kong, and bought the Seoul Hilton from the debt-ridden hands of the Daewoo Group.

That's all old economy stuff (though the American and British hotels are going great guns). Since CityDev's CDL Hotels International was just a holding company for the majority stake in M&C, investors could bypass CDLI shares in Hong Kong and buy M&C shares in London directly. This -- and Web mania -- prompted the restructuring. First, CDLHI sold its M&C stake to its parent, CityDev in Singapore. Then CDLHI became the group Internet company. Meanwhile, CityDev injected its networked Sceptre Reservation system and other e-hospitality businesses into CDLHI.

In one swoop CityDev sent several messages. Message No. 1: the CDLI experiment was a failure. The overseas hotels, originally owned by the Singapore parent directly, were transferred to the Hong Kong company to stir investors' interest. That obviously didn't happen. Message No. 2: the company acknowledges that its image and stock price are suffering because it didn't have an Internet strategy. Message No. 3: By locating its Internet company in Hong Kong, one of the Lion City's biggest companies is recognizing acknowledging what everyone else in Asia has known for months -- Hong Kong is the Internet capital of Asia, not Singapore.

Message No. 4 (and the most important one): CityDev's restructuring shows that the Internet boom is entering its second phase in Asia. Old economy companies are no longer jumping into Internet ventures just to push up their share prices but to enhance long-term shareholder value. Let's see what happens next.

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