China COSCO net falls 64 pct, in asset buy talks
China COSCO Holdings Co. Ltd. (1919.HK: Quote, Profile, Research) posted a worse-than-expected 64 percent fall in 2006 earnings on Thursday and said it was in talks to buy bulk vessels from its parent company, China COSCO Group.
China COSCO Group, the country's premier shipping conglomerate, has the biggest bulk carrier fleet in China, operating around 500 vessels with an appraised market value of 127 billion yuan ($16.43 billion), analysts estimated.
"The board has authorised management of the company to conduct a feasibility study and relevant preparation work," the company said in a statement.
The possible acquisition could further develop China COSCO Holdings' integrated shipping business. The Hong Kong-listed company owns one of China's two biggest container fleets.
"The assets should be injected in phases, with the first acquisition likely to happen in the third quarter at the earliest," said Geoffrey Cheng, an analyst at Daiwa Institute of Research.
China COSCO Holdings also said it expected to issue 1.5 billion yuan-denominated A shares in June to fund the acquisition of 12 vessels, a 51 percent interest in COSCO Logistics and other projects, worth 9.33 billion yuan. If the actual proceeds from the A-share issue are more than the total amount required, the surplus would be used as working capital, it added.
China COSCO earned 2.03 billion yuan (US$262.7 million) in 2006, down from 5.58 billion yuan in 2005, due to higher costs and lower freight rates amid fears of over capacity in the global container shipping market.
It lagged a mean forecast of 2.51 billion yuan from 15 analysts polled by Reuters Estimates.
Shares in China COSCO eased 2.09 percent to HK$7.03 in early Thursday trade. They rose 48 percent in 2006, lagging a 94 percent rise in the China Enterprises index of H shares over the same period.
The company proposed a bonus issue of 1.5 bonus shares for every 10 existing shares held.
China COSCO operates a container shipping fleet and has a 52 percent stake in sea container leasing and port company COSCO Pacific Ltd.
China COSCO Group, the country's premier shipping conglomerate, has the biggest bulk carrier fleet in China, operating around 500 vessels with an appraised market value of 127 billion yuan ($16.43 billion), analysts estimated.
"The board has authorised management of the company to conduct a feasibility study and relevant preparation work," the company said in a statement.
The possible acquisition could further develop China COSCO Holdings' integrated shipping business. The Hong Kong-listed company owns one of China's two biggest container fleets.
"The assets should be injected in phases, with the first acquisition likely to happen in the third quarter at the earliest," said Geoffrey Cheng, an analyst at Daiwa Institute of Research.
China COSCO Holdings also said it expected to issue 1.5 billion yuan-denominated A shares in June to fund the acquisition of 12 vessels, a 51 percent interest in COSCO Logistics and other projects, worth 9.33 billion yuan. If the actual proceeds from the A-share issue are more than the total amount required, the surplus would be used as working capital, it added.
China COSCO earned 2.03 billion yuan (US$262.7 million) in 2006, down from 5.58 billion yuan in 2005, due to higher costs and lower freight rates amid fears of over capacity in the global container shipping market.
It lagged a mean forecast of 2.51 billion yuan from 15 analysts polled by Reuters Estimates.
Shares in China COSCO eased 2.09 percent to HK$7.03 in early Thursday trade. They rose 48 percent in 2006, lagging a 94 percent rise in the China Enterprises index of H shares over the same period.
The company proposed a bonus issue of 1.5 bonus shares for every 10 existing shares held.
China COSCO operates a container shipping fleet and has a 52 percent stake in sea container leasing and port company COSCO Pacific Ltd.
