Guangzhou Auto plans international approach for share float

PUBLISHED : Friday, 10 March, 2006, 12:00am
UPDATED : Friday, 10 March, 2006, 12:00am

Guangzhou Automobile Group, a unit of red chip Denway Motors, is planning a share offering to raise funds for its expansion, although the listing is unlikely to happen this year, according to general manager Zeng Qinghong.

Speaking to reporters at the sidelines of the National People's Congress, Mr Zeng said the group wanted to be more transparent and enhance corporate governance by diversifying its shareholder base through a public share offer.

'This way, shareholders and banks can participate in monitoring our operations easier,' he said. 'We want to become an international company that follows international game rules.'

Mr Zeng said the company had yet to mandate an investment bank to handle the proposed listing, with potential venues including Hong Kong, the mainland, London and the United States.

'We are not yet ready for a listing in the short term, as we want to focus on further developing our business this year,' he said. 'If we can't get a good valuation, why would we want to list? Besides, we are negotiating for a few projects.'

Mr Zeng confirmed that the firm was in talks with Hyundai of South Korea on making cars in China, but would not comment on reports the plan had been submitted to the central government for approval.

He said the joint venture with Toyota of Japan would come on stream in Guangzhou in May and significant depreciation expense would be booked according to new mainland accounting rules. However, he implied its profit and loss statement would not look good.

Mr Zeng said the firm had yet to satisfy the one-year 'guidance period' for a China listing, although it had been advised by an investment bank about an offering.

Guangzhou Auto was established in June last year through a shareholding restructuring that saw Guangzhou Automobile Industry Group trim its holding from 100 per cent to 91.93 per cent.

Privately run car parts maker Wanxiang Group has bought a 3.99 per cent stake, Sino National Machinery Industry 3.69 per cent, Guangzhou Iron and Steel 0.2 per cent, and Guangzhou Changlong Hotel 0.18 per cent.

The purchases were based on Guangzhou Auto's audited net asset value of 3.49 billion yuan as of June 30, 2004, its website said.

The group targets an annual passenger car capacity of 1.1 million units and commercial vehicle capacity of 230,000 units by 2010. It aims for total output of 500,000 units by the end of this year.