Guangzhou Shipyard to take stake in property deal

PUBLISHED : Tuesday, 24 May, 1994, 12:00am
UPDATED : Tuesday, 24 May, 1994, 12:00am

GUANGZHOU Shipyard International plans to take a majority stake in a property project in southern China, marking the Chinese shipbuilder's maiden foray into the real estate market.

The company will take a 60 to 70 per cent stake in the development located between Dongguan and Xintang with an investment of more than 100 million yuan (about HK$89 million).

Its chairman Ren Fuwei said the board had already ratified the property venture and details should be finalised with two mainland developers by next month.

''It's not our intention to place too many resources into property development,'' said Mr Ren, who allayed concern over the move from from its core shipbuilding and container manufacturing business.

He said the property project would provide the company with a more lucrative profit margin and a steady source of income in the long run.

The project, which would be completed in two years, would be low risk, he said. A commercial complex would be built on a 10,000-square-metre site,with a car park, a pier, a retail and entertainment plaza, a hotel and two office buildings.

Guangzhou Shipyard picked the project after a review of property opportunities in Beijing, Shanghai and Guangdong, carried out since its listing in Hong Kong last August.

Mr Ren said the property venture would be funded by internal resources from the company's retained profit and surplus reserves of last year, and internal cash holdings which came to about 340 million yuan.

''This year is a year of growing up as far as the company is concerned,'' he said, adding that in addition to expanding existing operations, the company had diversified into several new areas.

Mr Ren said the newly established division making refrigerated containers would be in operation after June, while its ship-breaking arm was negotiating with customers in the Middle East on two contracts.

In addition, the company had signed a letter of intent with Hong Kong's Wah Kwong Shipping to develop a new fabric-reinforced, plastic passenger ship.

It has also recently secured a contract worth 170 million yuan for the steel structure of Humen Bridge in Guangdong, which will be completed in a year.

Mr Ren said Guangzhou Shipyard was bidding for two steel structural projects in Xiamen and Hong Kong.

Meanwhile, it was discussing with partners in the United States and Japan steel structural joint ventures in the mainland.

He expected the steel structural operation would account for 30 per cent of its business by 1996, container manufacturing 30 per cent and shipbuilding 40 per cent.

Under China's austerity programme, which caused a credit squeeze among state-owned enterprises, Guangzhou Shipyard posted an increase in debts from customers in the first quarter.

Mr Ren did not provide a figure for the rise, but said the problem of triangular debt would be resolved in the third quarter.

He said the company had broaden its customer base and reduced dependence on a single major customer.

Last year, a Shanghai state enterprise repaid the company 252 million yuan which was an overdue shipbuilding progress-payment.

Mr Ren expected the company to garner US$60 million in foreign exchange income this year and be cushioned from yuan fluctuations on the back of a rise in exports.

Guangzhou Shipyard would sell half of its ships and all its containers overseas. Last year, it manufactured ships solely for domestic buyers.