Chow brothers going public

Sex and property kings and NBR Rich Listers John and Michael Chow are about to list on the New Zealand Stock Exchange’s alternative board.

The brothers, who have an estimated $75 million fortune, have launched a reverse takeover bid for listed shell RIS Group [NZAX: RIS].

John Chow says he and Michael have signed an agreement that will pave the way for it to backdoor listing so they can quickly expand their property holdings. They will hold 90% of the ordinary shares in RIS.

Under the agreement, RIS has agreed to buy the shares in 16 Park Avenue, the Chows recently refurbished Otahuhu hotel, for $7 million. The transaction is a reverse takeover of RIS.

“Michael and I are committed to growing our property investments in New Zealand at a fast pace and, to do that, we need to attract capital from local and international sources. Going public with our property portfolio is a natural step in our expansion plans.”

“We are holders, not sellers, and we have plans for further expansion into the accommodation and hotel markets in New Zealand.”

The Chows have just finished converting two tired old commercial properties in Auckland into serviced residential accommodation and they are just starting redevelopment of Rotorua’s largest commercial building into a four-star hotel.

John and Michael Chow are not alone in taking a stake in RIS Group. VIG Group, owned by backdoor listing specialist, John Sorensen, has bought 10.94% of RIS Group.

In April RIS Group was fined $80,000 plus costs and censured by the NZX for missing the deadline to file its 2014 annual report, the third such breach since 2011.

RIS Group has been in existence as a penny dreadful for a decade. In 2012 the company sold its Retail Information Systems, a payment systems software, to USG Tech Solutions for $US1 million, with $US150,000 in cash and the remainder in USG shares, which are listed on the Bombay stock exchange, according to its website.

The shares amount to about 10% of USG but RIS said at the release of its first-half results in March that delays in setting up an account in India to trade the shares had left it with "extremely tight" cashflow. Its first-half net operating loss widened to $229,000 from a year-earlier loss of $39,000.

The company had managed to raise $100,000 through a convertible note agreement last November, allowing it to settle some outstanding liabilities.

RIS shares trade infrequently and were last at 0.2 cents, valuing the company at $1.48 million.

The Chows say they buy properties at the right price and have the cashflow and commitment to expand their property holdings exponentially if they can tap into public backing via the shareholding in RIS Group.

“We don’t want to be seen as just another passive listed property company and with our go fast-grow fast reputation I am sure the market will not see us in that light,” John Chow says.

“We are on this ride to make money but not at the expense of buildings that don’t add value to the community for the long term. We enjoy turning tired unprofitable buildings into revamped properties we are proud to hold for the long-term returns.”

He says that is just one aspect to their property dealings. “We have exciting plans for the future and can’t wait to get listed so that investors who see what we see can hop on for the ride.

“We don’t expect it to be a bumpy ride but we do expect good returns for investors.”

Backdoor or reverse listings are the controversial side of the NZX. There have been a few successful listings but most have failed.

They are attractive to entrepreneurs because they do not require a prospectus and are cheaper than IPOs.

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