Hosco unit looking for a berth on HK bourse

PUBLISHED : Wednesday, 13 July, 2005, 12:00am
UPDATED : Wednesday, 13 July, 2005, 12:00am

Dry-bulk shipper aims to raise US$100m and is unfazed by China Cosco's slide

Shipping firm North China Lines plans to list on the Hong Kong stock exchange this year, despite the bleak greeting China Cosco Holdings received in its initial public offering last month.

'The company hasn't submitted an application to the stock exchange yet but it plans to raise about US$100 million by the end of the year,' said one source, adding the company will list as a Hong Kong-registered red-chip instead of an H share.

Management was undeterred by the reception for China Cosco, according to the source.

'Unlike China Cosco, North China Lines serves mainly the domestic markets, which are less volatile,' the source said.

The company has hired Goldman Sachs and JP Morgan as sponsors, the source added. Both investment banks declined to comment.

If North China Lines makes it to market before the planned dry-bulk division spin-off of China Shipping Development, it would become the fifth shipping firm to list on Hong Kong's main board.

Established in 1992, North China Lines is the chartering subsidiary of Hebei Ocean Shipping (Hosco), which owns a fleet of 22 vessels with 1.34 million deadweight tonnes, according to Hosco's website.

Clients include private traders and governmental organisations that engage in minerals and grain trade.

However, market observers said dry-bulk shippers may need bargain-basement pricing to lure investors, who are sceptical of the sector's prospects.

'Market sentiment towards shipping is not very positive at the moment,' said Mandy Chan, portfolio manager at ABN Amro Asset Management, citing high oil prices and uncertainty over bulk freight rates.

At the weekend, South Korea's biggest dry-bulk goods shipper STX Pan Ocean slashed the offer price of its approximate S$538 million initial public offering to 90 Singapore cents per share. It had initially hoped to get up to S$1.27 per share.

Two weeks ago, China Cosco, the country's biggest container shipping line, fell 10 per cent in its trading debut after retail investors had subscribed for only 50 per cent of the shares on offer.

China Shipping Development trades at about 7.3 times forward earnings, while dry-bulk firm Pacific Basin trades at about 4.4 times forecast earnings. China Cosco, which ended at $3.80 yesterday - about 10 per cent lower than its issue price - commands a price-earnings ratio of 5.7 times. China Shipping Container trades at 3.8 times earnings.

Mainland's port operators are also hoping to tap Hong Kong for funds. Xiamen Port is expected to submit a listing application soon. Its sponsor will be BNP Peregrine.