HTIL shares sink 44.9pc after asset shake-up

PUBLISHED : Tuesday, 28 April, 2009, 12:00am
UPDATED : Tuesday, 28 April, 2009, 12:00am

Shares of Hutchison Telecommunications International Ltd (HTIL) closed 44.86 per cent lower at HK$1.34 yesterday after a restructuring in which the group distributed its interim dividend as shares in a new entity holding its Hong Kong and Macau operations.

HTIL is injecting its Hong Kong mobile and fixed-line operations and its Macau mobile assets into a new vehicle, Hutchison Telecommunications Hong Kong Holdings (HTHK), which will also be listed.

Analysts expect HTHK to be valued at HK$1.10 to HK$1.20 per share.

HTIL closed at HK$2.43 before the Hong Kong and Macau assets were hived off last Friday.

Analysts said the Hong Kong and Macau operations probably accounted for 50 per cent of the asset value of HTIL.

Qualified investors will receive 1 HTHK share for each HTIL share owned on April 30, the deadline for acceptance.

HTHK shares are expected to start trading on the main board on May 8.

HTIL still owns 50.5 per cent of mobile operator Partner Communications, which is listed in Israel.

'After the spin-off of Hutchison Telecommunications Hong Kong, Partner Communications is still worth HK$2 per share and will be HTIL's main profit contributor as other businesses are yet to be profitable,' said Dennis Lui Pok-man, the chief executive of HTIL.

Speaking after a shareholders' meeting yesterday, Mr Lui said HTIL was accelerating the sale of its Thailand mobile operations but more time would be required because of the recent political instability.

The company also owns operations in Vietnam, Indonesia and Sri Lanka.

Investment bank Credit Suisse said in a recent report it had cut HTIL's target price by 68.57 per cent from HK$3.50 to HK$1.10.

The price change reflected the distribution of Hong Kong and Macau assets, as well as the worsening fundamentals in three new markets, including Vietnam, Sri Lanka and Indonesia.

The bank downgraded the stock to 'underperform' from 'outperform', saying it did not expect the stock to repeat its past tremendous dividend returns now that it had spun off some assets.

HTHK's capital expenditure is expected to rise about 22 per cent this year to HK$1.3 billion for capacity expansion, upgrading the mobile network to 3.75G and expansion of the fibre-optic network, according to analyst Jimmy Cheong at JP Morgan.

To fund the Hong Kong operation, banking sources said HTIL was in talks with banks for a HK$5.5 billion loan, most of which would be injected into HTHK to strengthen its capital reserve.

At least five lenders had shown strong interest in joining the loan because of their good relationship with the borrower, the sources said.