Sinofert share sale funds acquisition

Sinofert Holdings, the fertiliser unit of mainland oil trader Sinochem Corp, has offered to sell US$300 million new shares to fund an asset acquisition from its parent, sources said.

The 400 million shares were offered at HK$5.78 to HK$6 each, representing an up to 7.67 per cent discount to the stock's last closing of HK$6.26, according to a sale document sent to institutional investors.

Citi is the bookrunner on the deal. Sinofert shares have almost doubled since the beginning of the year.

'Market sentiment has been supported by abundant liquidity. Investors are still keen on shopping around in Hong Kong,' said a portfolio manager at a fund house.

'Investment bankers are knocking on our door for equity share sales all day long. The names [on offer] are not only second tier or third-tier firms, but also red chips,' he added.

The sale document did not outline Sinofert's plan for the proceeds but fund managers indicated they would likely to be used for the long-awaited asset acquisition from its parent company, Sinochem Group.

Market sources have said that Sinofert was set to buy an 18.49 per cent stake in Shenzhen-listed Qinghai Salt Lake Potash from Sinochem, which was expected to be completed in the second half of the year.

The value of the asset acquisition could be about six billion yuan based on Qinghai's closing price of its shares yesterday.

Sinofert posted a 14.9 per cent gain in net profit to HK$896.24 million for last year, thanks to a 12.5 per cent increase in overall sales volume to 12.57 million tonnes. It sold 13 per cent more chemical fertiliser to 12.6 million tonnes in the year.

The firm has earmarked HK$350 million for capital expenditure this year, down from HK$558.6 million a year ago, and analysts suggested that it would prefer acquisitions for future expansion rather than organic growth.