Advertisement
Advertisement
Treaty of Nanking
Get more with myNEWS
A personalised news feed of stories that matter to you
Learn more

HK listing for water company

The mainland conglomerate Shanghai Industrial Holdings (SIH) is planning to add a Hong Kong listing for its Singapore-listed subsidiary Asia Water Technology, as it aims to expand aggressively its water services business.

SIH, an arm of the Shanghai municipal government, has a 73.4 per cent stake in Asia Water. The conglomerate, which already has its own Hong Kong listing, is planning a listing for Asia Water in Hong Kong at the end of next year or in 2013.

Asia Water raised a net S$72 million (HK$430 million) in Singapore in the first quarter of this year, after a rights issues of more than 1.21 billion shares at S$0.06 each.

The deputy chief executive of SIH, Zhou Jun said: 'We're going to boost our water services business in the coming three to four years. Water business has a profit margin of 20 per cent to 30 per cent, which is quite high.'

SIH has stakes in three water treatment and supply companies: Asia Water, General Water of China and United Runtong Water. The three have a combined daily handling capacity of 7 million to 7.5 million tonnes, and Zhou said he expected the capacity would grow to 8.5 million tonnes by the end of next year to make SIH one of China's three largest water companies.

SIH aims to boost the total capacity to up to 10 million tonnes by 2014. Increasing the capacity by 3 million tonnes a day would require a capital investment of about HK$2 billion, he said.

Zhou said the company would achieve the target through expanding its facilities and acquiring other companies. He expected to seal two acquisitions next year.

SIH's businesses focus on three key areas including infrastructure facilities, covering water supply and sewage treatment and toll roads; property; and consumer products. Last year, its water and toll roads business generated HK$1.68 billion of revenue. Zhou said he hoped that would more than double to HK$4 billion by 2013 through a rapid growth of its water services business.

The water services arm - although covering 26 cities on the mainland, mainly in the Yangtze River Delta and Pearl River Delta regions, as well as in central China - is small when compared with the group's other business areas.

It currently contributes only 2 per cent to 3 per cent of the company's profits. However, Zhou hoped it could become a core business, contributing a net profit of some HK$300 million to HK$500 million in two to five years' time.

Its three toll roads in Shanghai are generating an income of about HK$5 million per day, and Zhou said he expected the same daily income for its water business in three to five years.

'We will strive, within a period of three to five years, to attain a 20 per cent annual growth in profit for our water business,' Zhou said.

On the property side, SIH owns a 70 per cent share in Shanghai Industrial Urban Developer Group (SIUD), which is also listed on the Hong Kong Stock Exchange. Last Saturday it launched the construction of a luxury residential property project and a high-end commercial development in Shanghai.

SIUD's executive director and president, Ni Jianda, said: 'The property market is currently facing a critical moment and we think the situation next year will not be too optimistic. But if we did nothing, when the market rebounds in late next year or 2013, we will have nothing to launch on the market.'

Ni said he would not be surprised if home prices dropped further, by 20 per cent or more.

However, he said, he expected the mainland market could 'get back to normal with more transactions' by the end of next year.

Last month SIUD completed its acquisition of a 59 per cent stake in Shanghai Urban Development from its parent, SIH. The remaining 41 per cent is in the hands of the local Shanghai government. A Standard & Poor's credit analyst, Steffi Chen, said in a report that the move should improve SIUD's operating efficiency, profitability and financial performance over the next year to two years.

Post