Advertisement
Advertisement
Yuan
Get more with myNEWS
A personalised news feed of stories that matter to you
Learn more

Dongfang unit looks for growth overseas

Yuan
Carol Chan

Firm plans 15b yuan asset purchase from parent

Dongfang Electrical Machinery, which is planning a 15 billion yuan asset purchase from its parent firm, is looking to export sales as one of the company's future earnings drivers.

'We're aiming to explore more overseas markets, including India, Vietnam, Pakistan and Iran, as they have higher profit margins. Their demand for power equipment is increasing with the rapid economic growth,' Wang Ji, the chairman of Dongfang Electrical Corp (DEC), the parent of the Hong Kong and Shanghai-listed power generation equipment maker, said yesterday.

'We have cost advantages over foreign competitors.'

The strategy was also in line with the government policy encouraging mainland companies to 'go global', Mr Wang said.

Dongfang Electrical's acquisition of DEC assets will be in two steps, according to the unit's latest announcement.

It will pay 12.18 billion yuan for 68.05 per cent of Shanghai-listed Dongfang Boiler and all of Dongfang Turbine's unlisted shares held by DEC, higher than the 11.9 billion yuan it announced on February 2.

It will also pay a maximum of 2.83 billion yuan for the remaining 31.95 per cent of Dongfang Boiler from DEC if the parent firm succeeds in buying the shares from minority shareholders.

The whole deal, which allows DEC to fold most of its power generation machinery business into the listed firm, is expected to be completed in October or November.

'After the acquisition, Dongfang Electrical will become a fully integrated supplier of power generation equipment on a much larger scale, covering boilers, turbines and generators for coal-fired, gas, hydro-electric, wind power and nuclear power generation,' Mr Wang said.

The Sichuan-based power generation equipment maker would have orders on hand that were worth 60 billion yuan as of the end of last year upon completion of the acquisition.

Mr Wang said DEC did not have immediate plans to inject other assets into Dongfang Electrical.

DEC vice-president Zhang Xiaolun said earnings per share of the enlarged Dongfang Electrical could increase 51.4 per cent to 2.91 yuan from 1.92 yuan, assuming the acquisition was completed on January 1, although the company needed to issue 367 million new A shares to settle part of the deal.

Mr Zhang also said that orders on hand, of which 20 per cent were export contracts, were enough for the company to run at full capacity for the next two years, excluding any new orders.

Dongfang Electrical's Hong Kong-traded H shares closed 6.2 per cent higher to a record HK$37.80 yesterday. Its Shanghai-traded A shares surged their 10 per cent daily limit to 57.20 yuan.

The H shares have gained 82 per cent since the acquisition plan was unveiled on February 2. The A shares have shot up 111 per cent.

Shares of Dongfang Boiler also jumped their 10 per cent daily limit to close at 58.87 yuan. They have risen 104 per cent since February 2.

Post