Towngas sets sights on targets for acquisitions
Hong Kong and China Gas (Towngas), challenged with sluggish sales growth in its home market, is considering about 30 investment proposals in gas exploration and distribution, and water supply, according to its managing director.
After its annual shareholder meeting yesterday, Alfred Chan Wing-kin said the utility was scouting for acquisitions to add to its 60-strong portfolio of piped-gas network projects around the country.
He also unveiled the company's strategy for new mainland subsidiary, loss-making Panva Gas Holdings, which Towngas took over in February. Panva, which will be renamed Towngas China, would focus on downstream piped-gas supply in smaller cities in northeastern and central China, while the parent will target larger projects in top-tier cities in affluent coastal regions, he said.
The utility is pushing into the mainland to boost its earnings. It has registered less than 2 per cent growth in the year-to-date sales in Hong Kong of naphtha piped-gas from the same period a year ago.
To pave the way for a faster penetration into the mainland and cut about 15 per cent in costs, Mr Chan said Towngas and Panva were in the process of consolidating their back-office resources, personnel and overlapping business units such as merchandising and sourcing and equipment. Towngas, which has a controlling 45 per cent stake in Panva, has also said it would take an estimated HK$316 million worth of shares in the subsidiary's right issue.
'On top of a HK$195 million shareholder loan we lent to Panva, we hope, through the rights issue, the company's financial health will improve,' he said. 'We hope this will trigger an upgrade in its credit rating so that its borrowing costs will come down.'
Mr Chan expected Panva would be turned around this year. The company recorded a net loss of HK$256.33 million last year, against a net profit of HK$155.77 million a year earlier due largely to provisions for interest rate swaps.
Brokerage Nomura International (HK) estimated earnings contribution from Towngas' mainland operations would jump to HK$800 million in 2009, or about 20 per cent of the group's total, from HK$350 million last year. A Thomson First Call poll showed a profit consensus on Towngas' net profit this year at HK$6.01 billion, or 2.63 per cent growth.
Towngas shares closed down 0.6 per cent yesterday at HK$16.56.