Kingway stock soars on rumours of asset sale

PUBLISHED : Wednesday, 15 February, 2012, 12:00am
UPDATED : Wednesday, 15 February, 2012, 12:00am


Shares in one of Guangdong's largest breweries, Kingway Brewery, jumped to a near five-year high yesterday as bidders lined up to buy its brewery operations and the Kingway brand.

The stock closed up 27 HK cents, or 10.11 per cent, yesterday at HK$2.94, gaining 17.6 per cent since the close of trade on Friday.

Kingway chairman Huang Xiaofeng said yesterday that the proposed sales would not involve company shares and that its controlling shareholder, GDH, intended to maintain its 73.8 per cent hold.

Market rumours abounded that domestic and foreign breweries such as China Resources Enterprise (CRE), Anheuser-Busch and Tsingtao were potential contenders for the Kingway portfolio - composed of eight breweries including those in Dongguan, Shenzhen, Foshan and Shantou; and a distribution network in the manufacturing-oriented Guangdong.

CRE and Anheuser declined to comment yesterday. Tsingtao could not be reached for comment.

Brokers said the sale marked the latest phase of consolidation in the sector as bigger players embarked on acquisitions to enlarge their market share. They said brewers were challenged by higher wages and limited room to lift selling prices as a result of sharp consumer price inflation.

'It is much faster to expand through acquiring existing facilities and distribution networks than to build from scratch,' said Christfund Securities research director Simon Lam Ka-hang. 'News of the sale of Kingway's assets caused a shadow effect on its shares.'

Last year, CRE failed to buy a substantial stake in Kingway, dealing a setback to a plan to boost its presence in Guangdong. Anheuser, which sells Budweiser, Stella Artois and Jin Long Quan beer, also wanted to expand its 35-strong brewery portfolio on the mainland through acquisitions, an analyst said.