Wing On Travel tumbles on plan to raise funds

PUBLISHED : Thursday, 10 December, 2009, 12:00am
UPDATED : Thursday, 10 December, 2009, 12:00am

Wing On Travel spooked investors yesterday after announcing plans to tap the market for more than HK$800 million with its fifth major fund-raising plan in the past 2 1/2 years.

The travel operator tumbled the most in seven months, sliding 19.1 per cent to 3.4 HK cents. More than HK$15.8 million worth of its shares changed hands, up fivefold from the previous session, as investors piled into the sell-off. It was the third-worst performing stock in Hong Kong.

Wing On has launched three share placements, two rights issues and a convertible bond placement since June 2007, according to stock exchange records. It was targeting a combined sum of as much as HK$2.7 billion.

The current round of fund-raising includes a rights issue that could raise as much as HK$539 million and a convertible bond placement for up to HK$289 million. Wing On said it planned to consolidate every 20 issued ordinary shares into one to facilitate the process.

'It's a very bad situation,' said Ricky Tam Siu-hing, a director at Champlus Asset Management. 'Suppose next time it cannot raise more funds; it may indicate that the company cannot survive.'

Wing On was seeking capital to repay loans and cover building costs for hotel projects in Hong Kong and on the mainland. It announced plans to raise as much as HK$1.1 billion this summer, citing similar reasons, but only generated HK$61 million.

It is selling rights shares on a five-for-one basis at 15 HK cents each. That is a 77.9 per cent discount from yesterday's adjusted close of 68 HK cents after accounting for the consolidation price.

Tam said retail investors might decide against joining the rights issue because of concerns about the firm's financial history.

'For investors, this type of company is very risky,' he said. 'The last few times they may have joined the fund-raising, but then the [attempts] keep coming.'

Kenny Tang Sing-hing, the executive director at Redford Asset Management, said Wing On might face near-term selling pressure since the rights price was so far below its adjusted share price.

'And since the share price will be getting higher [after the consolidation], it will discourage other investors from entering the market,' he said. 'It's [too expensive] for just a second- or third-tier stock.'

Tang said the market might show more leniency towards Wing On's repeated fund-raising, however, because the company was expanding. It has access to the mainland's growing tourism industry and has provided specific reasons for how it plans to use the new capital.

Wing On's primary business is selling and operating travel packages. It also has interests in hotels, luxury trains and securities trading.

Its shares have plummeted 94.6 per cent from the start of June 2007. It announced in September that it lost HK$115.1 million in the first half of this year, compared with a HK$80.4 million loss in last year's first half.

Wing On's capital reorganisation plans will be put to vote at a special general meeting, which has yet to be announced.


Wing On tapping market to repay loans and cover hotel construction costs

Latest convertible bond placement and rights issue to raise more than, in HK$: $800m

Previous fund-raising efforts since June 2007 have targeted a combined, in HK$: $2.7b