Rights issue targets China's 10m new homes

PUBLISHED : Saturday, 19 March, 2011, 12:00am
UPDATED : Saturday, 19 March, 2011, 12:00am

China State Construction International Holdings plans to raise at least HK$3.58 billion through a rights issue to build more infrastructure projects on the mainland, the firm announced yesterday.

Shares of the construction firm, a subsidiary of state-owned China Overseas Holdings, fell 2.8 per cent to HK$7 yesterday.

CSC will issue 597.36 million rights shares at HK$6 each, with one for every five existing shares. The rights shares will account for 16.67 per cent of the company's enlarged share capital. The rights shares will start trading on May 18.

'The fund-raising can augment the financial position of the company and enable it to capture more investment opportunities in infrastructure projects in China. The company will actively explore the feasibility of acquisition of infrastructure projects in the mainland from its parent company in search of new engines for profit growth,' said CSC.

China Overseas Holdings, which owns 61.9 per cent of the Hong Kong-listed firm, is in turn a subsidiary of China State Construction Engineering Corporation, a Shanghai-listed state-owned construction conglomerate.

On March 10, Beijing announced that 1.3 trillion yuan (HK$1.5 trillion) would be spent on building 10 million affordable homes this year.

'CSC will grasp the great opportunity brought by the country's plan to build 10 million units of affordable housing,' the company said.

In February, CSC signed a HK$2 billion affordable housing project in Chongqing municipality, wrote Leon Chik in a JP Morgan report. He added: 'CSC has already contracted more build-and-transfer projects this year than last year. The rapid pace of new project wins supports the case that CSC is a leading winner from China's push to build affordable housing.'

In the first two months of this year, CSC gained HK$6.47 billion of contracts, 3.5 times higher than the same period last year, wrote Fiona Wong in a Kingsway Research report. 'The management said several other cities are in talks and we believe more affordable housing projects will be signed this year.'

CSC said it would 'prudently' explore infrastructure investments in overseas markets including India. In Hong Kong, CSC will also seek infrastructure opportunities and strive to maintain its market share.

The net profit of CSC soared 53.7 per cent to HK$1.04 billion last year, beating the market consensus estimate of HK$945 million, while turnover grew 23.5 per cent to HK$11.98 billion.

Hong Kong accounted for 52 per cent of the firm's revenue last year, while Macau accounted for 0.7 per cent and the mainland 40.3 per cent.

Going flat-out

Beijing's plan to see 10 million new homes built on the mainland this year is expected to cost this amount, in yuan: 1.3tr yuan