Placement hits High Speed Transmission
Toh Han Shih
China High Speed Transmission Equipment Group fell 6.9 per cent to HK$17.22 in Hong Kong yesterday in one of the heaviest trading days in the company's history after a HK$2.26 billion share placement.
Yesterday morning, China High Speed Transmission said it had agreed to place 130 million shares, raising gross proceeds of HK$2.26 billion and net proceeds of HK$2.22 billion. The shares would be placed with at least six parties, none of whom is expected to become a substantial shareholder. Goldman Sachs was placing agent.
The company said it planned to use net proceeds for capital spending, for general corporate purposes and to strengthen its balance sheet and liquidity. 'The placement represents an opportunity to raise capital while broadening the shareholders' base and capital base of the company,' it said.
China High Speed Transmission produces mechanical transmission equipment for a range of industries, including the wind-power, railway, shipping, construction materials, aerospace and mining sectors.
The placement price of HK$17.38 per share was a 6.05 per cent discount to the firm's share price of HK$18.50 on Thursday and a 4.48 per cent discount to the average share price for the previous five consecutive trading days.
The 130 million placement shares represent 9.45 per cent of the firm's enlarged share capital.
JP Morgan analyst Boris Kan said in a recent report that China High Speed Transmission's management was 'bullish on the gearbox market for metro rail and high-speed rail', and expected strong growth from control systems for wind turbines.
During the first half, China High Speed Transmission's net profit jumped 121.5 per cent to 563.49 million yuan, and turnover soared 52.3 per cent to 3.1 billion yuan. The company's sales of wind gear transmission equipment leapt 71.4 per cent to 2.2 billion yuan during this period.
'We remain positive on High Speed Transmission following the strong results and the more positive outlook on wind sector,' Kan wrote.
The stock price fell in line with the discount on the placement shares
The company is placing 130 million shares to at least six investors to raise, in HK dollars, $2.26b