NWS asset sale will help boost coffers by $200m
The firm is better positioned to put cash into money-making projects while continuing to pay off outstanding debt
The partial divestment of a mainland toll-road and bridge portfolio by NWS Holdings will generate a one-off windfall of nearly $200 million, giving the company cash at the ready to plough back into other investment projects, according to a company source.
NWS has sold 12 toll roads and one bridge in Zhaoqing, Guangdong province, for $1.16 billion. This compares with a combined net asset value of $676.82 million for the projects as of June 30.
Chairman Henry Cheng Kar-shun said yesterday the sale would allow the company to cut debt, weed out underperforming projects, boost its cash position and seek other infrastructure projects with better returns.
'We're currently exploring new investment opportunities and new projects, and will announce details when they're confirmed,' he said.
But an NWS spokesman said distributing part of the proceeds as a special dividend was unlikely.
Analysts responded positively to the exceptional gain, upgrading the company's earnings forecast for the financial year to June next year.
Some analysts raised their profit forecast by about $200 million to $1.6 billion for the financial year. A Thomson First Call poll showed a net profit consensus of $1.43 billion for the period.
NWS, the infrastructure and port flagship of New World Development, sold the projects to local partners, with most going to the Zhaoqing municipal government.
The divestment was part of a settlement with local governments required by a State Council ban in 1998 on guaranteed returns for infrastructure projects.
The sale could not have come at a better time. NWS is burdened with $6 billion in debt and is striving to reduce its obligations.
'Our debt level has been going down from $9.9 billion at the group's reorganisation at the beginning of this year to $6 billion now,' the NWS spokesman said. 'Half of the proceeds from the sale will be spent repaying debts.'
Since 1998, NWS ceased recognising guaranteed returns from the toll roads and bridge, resulting in a combined net loss of $2.65 million in the 12 months to June.
An analyst at a European brokerage said: 'I wouldn't be surprised to see further sales of non-performing infrastructure projects. It is obvious the company needs more cash to cut debt.'
But the NWS spokesman said the company would not sell off projects for the sake of having cash to repay debt, though he conceded sales of other non-performing assets were on the cards.
Analysts believed NWS would retain three crown assets - the northern ring road in Guangzhou, the Beijing-Zhuhai expressway and the Tianjin expressway - which contributed about 70 per cent of the company's nearly $400 million in operating profit from toll roads and bridges. Projects with smaller contributions include toll roads in Guangxi, Shenzhen, Shanxi, Wuhan and toll bridges in Wuhan, Tianjin and Guangdong.
