Copper miner sets ball rolling on cash calls
An $880 million share placement announced yesterday by Jiangxi Copper is likely to be the first of many cash calls made on the Hong Kong bourse this year, with blue-chip property companies next in the queue, analysts said.
The announcement came as the Hang Seng Index's nine-day rally hit a 41/2-year high.
'It wouldn't surprise me if there are other companies lining up for share placements,' said Ricky Cheung, a fund manager at Phillip Asset Management.
When equities rise in a bull market, said Mr Cheung, small and medium-sized companies were usually the first to look for equity financing. Blue-chip companies tended to follow soon after.
At least seven small and medium-sized firms have tapped the market for a combined $2 billion within the past month, including Pearl Oriental Enterprises and Asia Alliance Holdings, which also announced their placement plans yesterday.
Pearl Oriental wants to place 400 million shares at 35 cents each to raise $140 million, which will be used to fund the acquisition of its Hotel Golden Dragon in Macau. The company yesterday said its loss for the year to March 31 widened to $108.3 million, from $490,906 in the preceding year.
Asia Alliance announced a rights-issue plan by which it will issue 10 shares for every consolidated share held, raising up to $142 million to repay bank loans. The stock tumbled 47 per cent yesterday to close at 4.1 cents.
Dao Heng Securities head of research Eric Yuen said index property stocks were now likely candidates for share placements in the short term.
'Share prices of many property stocks now trade at a very thin discount to their net asset values,' he said. 'It's really good timing for the developers to think about share placements.'
Rising finance costs offer another sound reason to go directly to portfolio investors for capital. 'Higher interest rates push up debt financing costs. Equity financing is a better option,' an analyst at a US-based securities house said.
Among blue-chip property counters, Sino Land is routinely tipped as likely to raise equity financing, though the mid-sized developer raised $2 billion in a convertible bond issue last year.
'Sino Land has been very aggressive in land auctions in recent years, making it very hungry for funds,' an analyst said.
Sino Land won a land auction at $1.82 billion for a commercial site in Kowloon Bay in February and beat bigger rivals to invest up to $9 billion developing Kowloon-Canton Railway Corp's more than 2,500-unit residential project at Wu Kai Sha station in June.
Shares in Jiangxi Copper, the locally listed arm of China's biggest metals producer, were suspended from trading yesterday pending the announcement.