COSCO in talks to buy 400 bulk vessels from parent
China COSCO Holdings (1919), the Hong Kong-listed arm of the mainland's largest shipping conglomerate, may purchase 400 bulk vessels from its parent following its A-share listing in the first half of this year.
The company said in a statement to the Hong Kong stock exchange that it is in negotiations to acquire bulk vessels from its parent, COSCO Group.
The state-owned conglomerate, which has a fleet of 700 vessels - including dry bulk carriers, oil tankers and container ships - is following government policy to publicly list all of its key assets, China COSCO vice chairman Zhang Fusheng said in Hong Kong Thursday.
President Chen Hongshen gave no details of the timing or funding method for the acquisition.
China COSCO's dry bulk business accounted for a large proportion of the parent's total net profit of 10 billion yuan (HK$10.11 billion) in the past three years, Chen said.
The subsidiary plans to issue up to 1.5 billion A shares to raise 7.7 billion yuan to purchase 12 new container vessels and acquire a 51 percent stake in the logistics business of its parent in the first half.
For this year, the company has set aside 12.9 billion yuan for capital expenditure, including 2.8 billion yuan to purchase container vessels and 3.4 billion yuan for terminal investments. It will also invest 3.2 billion yuan to expand its logistics business.
China COSCO shares rose 0.84 percent to close Thursday at HK$ 7.24. The stock has doubled over the past six months, benefiting from speculation over its A-share listing and assets injection from its parent.
Market observers maintain a positive outlook on the injection, which is expected to take place in the second half.
"We view China COSCO as the premier flagship shipping conglomerate in China, which deserves to trade at a premium to peers," JPMorgan analyst Christie Ju wrote.
The company Thursday blamed declining freight rates and rising oil prices for a 63.6 percent decline in net profit last year to 2.03 billion yuan.
The profit was in line with JPMorgan's forecast of 2 billion yuan, but fell far below Goldman Sachs' prediction of 2.61 billion yuan. Earnings per share were 33 fen, compared to 1.088 yuan the previous year.
Turnover climbed 6.3 percent to 51 billion yuan from a restated 48 billion yuan in 2005.