New | Guangzhou Shipyard stock surges on asset acquisition
Stock nearly doubles on news it acquires shipbuilding assets
The Hong Kong share price of loss-making Guangzhou Shipyard International nearly doubled in morning trade on news that it has acquired shipbuilding assets.
On the first day of trading since its suspension on April 7, the stock jumped up to 93.8 per cent to an intraday high of HK$26.60 this morning after the shipbuilding firm announced the 5.5 billion yuan asset acquisition. The share price was up 60.3 per cent at HK$22 around 12.30pm, still its highest in six years.
By mid-day, some 45 million of the company’s shares had changed hands in the heaviest trading in nearly 10 years. Meanwhile in Shanghai, the share price rose by the maximum permitted limit of 10 per cent to 18.84 yuan.
On Friday, Guangzhou Shipyard announced it had entered into a conditional agreement to acquire from its state-owned parent China State Shipbuilding Corporation (CSSC) all the shares of CSSC Huangpu Wenchong Shipbuilding for 4.53 billion yuan. It will pay for the acquisition in part by 679.1 million yuan in cash and the rest by issuing yuan-denominated A shares to CSSC.
The same day, Guangzhou Shipyard acquired shipbuilding assets from Yangzhou Kejin Shipyard, a private Chinese shipbuilder fully owned by an individual named Xie Chuanyong, for 968 million yuan. Guangzhou Shipyard will pay for the acquisition party by issuing A shares to Yangzhou Kejin.
To finance its acquisitions, Guangzhou Shipyard’s board of directors resolved on Friday to raise up to 1.83 billion yuan by placing 111.15 million A shares at 16.48 yuan per share to a maximum of 10 subscribers, including fund managers, securities companies, insurers, individuals and qualified foreign institutional investors.
After all the transactions are completed, CSSC will own 57.18 per cent of Guangzhou Shipyard while Yangzhou Kejin will own 4.61 per cent and the subscribers of the share placement will own 7.5 per cent.
“Upon completion of the acquisition (of Huangpu Wenchong), there will be marked increase in revenue and profitability of the company, thereby enhancing the company’s profitability and resilience to financial risks. The company will enrich and extend its business scope and product line. Through the acquisition of shipbuilding assets of Yangzhou Kejin, it can enhance production capacity of the company’s liquid cargo carrier by which the company can have a leading position,” said Guangzhou Shipyard.
Huangpu Wenchong builds both civilian and military ships, including missile frigates and missile cruisers.
“Certain military assets have entered into listed company through methods such as asset injection. CSSC, as one of the top 10 military conglomerates in China, proactively follows the marketisation reform direction for the national defence industry. By the acquisitions, it is able to carry out asset securitisation for military assets, [and] enhance protection for military construction assignments through financing from the listing platform (Guangzhou Shipyard), so as to exert the support of capital markets towards the development of military enterprises,” Guangzhou Shipyard added.
The proposed transactions require the approval of the Chinese authorities and shareholders.
In the first nine months of this year, Guangzhou Shipyard’s net loss ballooned by 742 per cent to 614.57 million yuan from 72.98 million yuan in the same period last year.
