SIH in line for parental support

Shanghai Industrial Investment (Holdings) Co, the Hong Kong investment arm of the Shanghai municipal government, could inject assets into subsidiary Shanghai Industrial Holdings (SIH), which plans to raise about $800 million in a Hong Kong flotation.

A report by the flotation sponsor, Peregrine Capital, said personal consumption operations, pillar industries and infrastructure projects were potential takeover targets for SIH.

Peregrine said SIH would be groomed to become a conglomerate like Citic Pacific and Guangdong Investment.

SIH is engaged in four areas of business - tobacco manufacturing through Nanyang Tobacco, packaging material by Wing Fat Printing, pharmaceuticals through Sunve Pharmaceutical, and personal care products by Shanghai Jahwa. Nanyang Tobacco, which makes Double Happiness brand cigarettes, contributed 81 per cent of SIH's net profits last year, on 49 per cent of turnover.

Hong Kong-made Double Happiness, the third-most popular foreign brand in China in 1993, was worth $562 million according to American Appraisal Hong Kong, the brokerage said.

Despite rises in three other divisions last year, net profit at SIH slipped 6 per cent to $294 million, as Nanyang Tobacco's gross profits declined.