Cosco Pacific (Hong Kong stock code 1199) is up 3.7% at HK$11.20, outperforming the boarder market’s 0.2% decline, after the Chinese port operator Monday announced a plan to sell its entire 21.8% stake in container maker China International Marine Containers (Group) (Hong Kong stock code 2039) to its state-owned parent for US$1.22 billion. The blue-chip company will post a pretax gain of US$470.2 million from the sale; analysts expect China Cosco (1919), which holds a 43% stake in Cosco Pacific, will likely generate a gain of around US$200 million from CIMC sale. The deal is the second inter-group transactions as China Cosco tries to shore up its finance after recording two straight years of losses. In March, China Cosco announced a plan to sell its logistic unit for CNY6.74 billion. The deal will give China Cosco a pretax gain of CNY1.96 billion. China Cosco is also up 2.9% at HK$2.52.
PICC Property and Casualty Company (Hong Kong Stock Code 02328) said it proposes to raise about Rmb5,796 million through a rights issue on the basis of 1.1 rights shares for every 10 existing shares held by shareholders at a subscription price of HK$5.38 per H rights share and Rmb4.3 per domestic rights share.
The estimated net proceeds of about Rmb5,763 million will be used to strengthen the capital base of PICC P&C and to improve its solvency margin. The subscription price of HK$5.38 per H rights share represents a discount of about 47.3% to the closing price of HK$10.2.
The People’s Insurance Company (Group) of China Limited (PICC Group) (01339) has undertaken to participate in the rights issue, contributing around Rmb3.999 billion to PICC P&C for subscription of rights shares allotted. Upon completion of the rights issue of PICC P&C, the proportion of shareholding held by PICC Group will remain unchanged, representing 69% of the issued capital of PICC P&C.
The stock is down is down 2.845 to HK$9.91, recovered from earlier low of HK$9.70.
ICBC (Hong kong stock code 1398) is down 2% to HK$5.51. Goldman Sachs seeks to sell all of its remaining stake in ICBC for around US$1.1 billion, exiting its investment in China’s biggest bank made seven years ago. The placement price HK$5.47-HK$5.50 range represents a 2.5%-3.0% discount to ICBC’s Monday close of HK$5.64 Monday’s sale marks Goldman’s sixth and final sale of ICBC shares.
Li & Fung (Hong Kong stock code 0494) jumps 7% to HK$11.01 after the company guided that its operating profit can return to 2011 levels. UBS, which has been the most bearish among major brokers on the sourcing firm previously, upgrades the stock to Neutral from Sell.
“I haven’t looked at the operating profit figure, but from a net profit standpoint, if Li & Fung can achieve what it earned in 2011, then the stock is trading at about 17X prospective earnings,” says Daniel So, wealth management strategist at Sun Hung Kai Financial. “This is lower comparing with the stock trading at 25X-30X P/Es during its high growth era, but not terribly attractive as Li & Fung’s high-growth era is over.” So notes another export-oriented firm, Esprit (0330), also outperformed recently. “Comparatively, I prefer Li & Fung given its largest market is U.S. whereas Esprit’s is in Europe.” Esprit is up 1.9% at HK$10.86.
Geely (Hong Kong Stock Code 0175) is down 3.9% at HK$3.93 at midday. UOB KayHian trims Geely Auto’s target price to HK$4.80 from HK$4.90 but keeps the stock at Buy. It says that Geely reported better-than-expected April sales with shipments up 22% on-year to 44,491 units, driven by domestic sales of new models like Emgrand. Still, while overall sales beat expectations, SUV sales disappointed; UOB notes that Geely sold only 4,590 SUVs in April, lower than the peak of 8,000 in January 13 and 5,000 in March. According to the company, the lower SUV sales in April were partly due to the earthquake in Sichuan, which disrupted production of Geely’s Chengdu plant for a few days, but UOB believes the increasing new SUV models launched by competitors may have diluted sales of Geely’s SUVs. “The lower-than-expected sales of the higher-margin SUVs would result in weaker margin for this year.”
China Resources Power (Hong Kong stock code 00836) and China Resources Gas (01193) jointly announced their proposed combination through the acquisition of CR Gas by CR Power with the objective of forming an integrated energy and utility group with a presence in more than 20 provinces, autonomous regions and municipalities in China. It is also the intention of CR Power to change its name to “China Resources Energy Holdings Limited” upon completion of the proposed merger. CR Gas will become a wholly-owned subsidiary of CR Power, and the listing of the CR Gas shares will be withdrawn from the Stock Exchange.
The proposed merger will take the form solely of an effective exchange of scheme shares for consideration shares. Based on the closing share price of CR Power shares of HK$25.4 per share as at the last trading day and the share exchange ratio of 0.97 CR Power share for every scheme share cancelled, the consideration for each scheme of about HK$24.64 represents a premium of around 12.77% over the closing price of HK$21.85 per CR Gas share. Trading in shares of CR Power and GR Gas resumed this morning. China Resources Power fell 8.9% to HK$23.15 and China Resources Power depped 1.14% to HK$21.60.
