Uni-President's share price falls after rights issue announcement

The share price of food and beverage maker Uni-President China fell 7.1 per cent to HK$6.02 yesterday, its lowest for more than 18 months, after it announced a HK$3.28 billion rights issue on Sunday.

The rights issue was likely a negative signal, Haitong International Research analyst Nicholas Wang wrote in a report yesterday. "The company's business outlook is not encouraging in the medium term, given sluggish demand in the mainland market."

In the first quarter, Uni-President's net profit fell 25.2 per cent to 236.5 million yuan (HK$298 million), Wang wrote. For the whole of this year, Haitong predicts Uni-President's net profit will fall 14.8 per cent to 780 million yuan.

Uni-President plans to raise HK$3.27 billion of net proceeds by issuing 719.89 million rights shares on the basis of one rights share for every five shares held. The subscription price is HK$4.56 per share, which is 29.6 per cent lower than the firm's closing share price last Friday and 24.3 per cent lower than its closing share price yesterday. Considering the dilution effect, the subscription price is 7 per cent lower than last Friday's closing price, Wang wrote. The first day of dealing in shares on an ex-rights basis is May 26.

The firm said it would use the HK$3.27 billion of net proceeds to repay bank borrowings and for general working capital.

Last year, Uni-President suffered a net decrease of 876.9 million yuan in cash, while its long-term borrowings surged 43.2 per cent to 5.1 billion yuan and short-term borrowings more than doubled to 902.34 million yuan from 408.56 million yuan in 2012.