China Merchants Holdings (International), the mainland's largest listed port operator, has confirmed it will invest in a US$1 billion project in Vietnam - its first overseas port project - after reporting a 7.4 per cent profit growth. Net profit rose to HK$2.54 billion last year from HK$2.36 billion in 2005, thanks to a 64.2 per cent surge in its container throughput that boosted turnover by 47 per cent to HK$4.37 billion. The profit is below a mean estimate of HK$2.65 billion in a Thomson First Call poll of 18 analysts. Shares in China Merchants fell 2.51 per cent yesterday to HK$34.90 after the results announcement. Excluding one-off items such as disposal gains from subsidiaries or property revaluation, recurring profit was 22.5 per cent higher at HK$2.62 billion. China Merchants would continue to increase investment in the mainland and look for overseas port projects, said chairman Fu Yuning. The company's ports in Hong Kong and the mainland handled 40.2 million 20-foot equivalent units (teu) last year. Mr Fu said the company would take part in the building of a container terminal in Ben Ding Sao Mai Seaport in Vietnam. The greenfield port, 90km south of Ho Chi Minh City, comprising six berths with an annual capacity of three million teu, would be developed in two phases, Mr Fu said. China Merchants' parent company earlier this month signed a strategic alliance with Vietnam National Shipping Lines, the nation's biggest shipping line by fleet size, to develop the project. The first phase, consisting of two berths and expected to begin operation in 2009, would need investment of US$300 million, Mr Fu said. The second phase would need US$700 million. Mr Fu said China Merchants was still in talks with Vietnam National Shipping regarding the shareholder structure of the project but added it hoped to get a controlling stake. Its parent company would invest in shipbuilding and property development projects in Vietnam through other subsidiaries, he said. China Merchants budgeted HK$3 billion to HK$3.5 billion for capital spending this year, up from last year's HK$2.3 billion, said deputy general manager Cynthia Wong Sin-yue. About HK$500 million to HK$700 million would be used for potential new projects, and the remainder for the expansion of existing ports. Ms Wong said the capital spending would mainly be funded by internal resources and bank borrowings, and as a result, the interest-bearing loans to net assets ratio was expected to rise to 50 per cent from 41.7 per cent as at the end of last year. China Merchants will have 11 container berths with a capacity of four million to five million teu starting operations this year in Shenzhen, Shanghai and Qingdao.