Guangzhou Auto falls in Hong Kong on trad­ing de­but

The Pak Banker - - Company+Boss News -

HONG KONG: Guangzhou Au­to­mo­bile Group Co., a part­ner of Toy­ota Mo­tor Corp. and Honda Mo­tor Co. in China, fell af­ter mak­ing its de­but on the Hong Kong stock ex­change.

The shares, which opened at HK$9, de­clined 1.5 per­cent to HK$8.89 as of 12:29 p.m., com­pared with a 0.7 per­cent gain in the bench­mark Hang Seng In­dex. Guangzhou Auto listed af­ter com­plet­ing a buy­out of unit Den­way Mo­tors Ltd. last week.

Based on the ra­tio of closely held Guangzhou Auto stock ex­changed for each share in Den­way as part of the buy­out, the shares are trad­ing near the con­ver­sion price and in line with ex­pec­ta­tions, said Macquarie Se­cu­ri­ties Ltd. an­a­lyst Leah Jiang. In time, the stock may ben­e­fit from Guangzhou Auto mak­ing Toy­ota's Camry and Honda's Ac­cord sedans, among the top three best-sell­ing cars in their seg­ment in China, she said.

"This should be an in­ter­est­ing play for in­vestors to get ex­po­sure to the medium to large-sized cars," Jiang said to­day by phone from Hong Kong.

Den­way in­vestors re­ceived 0.47 share in the Guang­dong, China-based au­tomaker for each share in Den­way they owned. Den­way holds 50 per­cent of Guangqi Honda Au­to­mo­bile Co., a ven- ture with Honda Mo­tor that is adding pro­duc­tion of the Ac­cord Cross­tour wagon this year.

Buy­ing Den­way cre­ated a com­pany with a com­bined value of as much as $10.6 bil­lion, based on es­ti­mates last month by An­glo Chi­nese Cor­po­rate Fi­nance Ltd., an ad­viser on the deal.

Guangzhou Auto, which pre­vi­ously owned 38 per­cent of Den­way, first of­fered in May to ex­change about 0.38 a share in the new com­pany for each share in Den­way it didn't own. The car­maker raised its bid 25 per­cent on June 8 af­ter the stock plunged to a oneyear low.

Guangzhou Auto said May 19 its shares were worth as much as HK$14.49 apiece. Den­way stopped trad­ing on Aug. 16 at HK$4.23, down 14 per­cent this year.

A "big pro­por­tion" of in­vestors voted in fa­vor of the buy­out plan, Den­way Chair­man Zhang Fangyou said af­ter a share­hold­ers meet­ing last month.

While ac­quir­ing Den­way may strengthen Guangzhou Auto's abil­ity to raise funds, the weak­en­ing out­look for the auto in­dus­try in the nation may weigh on the stock, said Francis Lun, gen­eral man­ager at Ful­bright Se­cu­ri­ties Ltd. in Hong Kong.

"Don't ex­pect the share price to surge," Lun said be­fore the list­ing. "For the auto in­dus­try we have to face the fact that car sales will slow down in the sec­ond half. Peo­ple are still buy­ing cars, but not at the rate of last year."

Guangzhou Auto may record a profit of 3.76 bil­lion yuan this year, with­out tak­ing into ac­count the of­fer for Den­way shares, the com­pany said on May 19. Guangzhou Auto's net in­come was 2 bil­lion yuan last year. The au­tomaker aims to boost an­nual pro­duc­tion ca­pac­ity to more than 1 mil­lion ve­hi­cles by the end of this year from 606,600 in 2009.

Ris­ing af­flu­ence has spurred de­mand for ve­hi­cles in China, which over­took the U.S. to be­come the world's biggest au­to­mo­bile mar­ket last year. Ve­hi­cle sales may rise to 16 mil­lion this year, the China As­so­ci­a­tion of Au­to­mo­bile Man­u­fac­tur­ers said on Aug. 10, boost­ing its fore­cast from a pre­vi­ous es­ti­mate of 15 mil­lion. Guangzhou Auto, which also makes mo­tor­cy­cles and light-duty trucks, plans to in­tro­duce own-brand ve­hi­cles, ac­cord­ing to the com­pany's web­site.

More­over, China Mer­chants Hold­ings (In­ter­na­tional) Co., an in­vestor in ports mov­ing about a third of the coun­try's con­tain­ers, said first-half profit rose 12 per­cent as gains in global trade lifted cargo traf­fic.

Net in­come in­creased to HK$1.93 bil­lion ($248 mil­lion), or 79.06 Hong Kong cents a share, from HK$1.73 bil­lion, or 71.27 HK cents, a year ear­lier, the com­pany said in a Hong Kong stock ex­change state­ment to­day. Sales rose 21 per­cent to HK$1.99 bil­lion.

China Mer­chants, Cosco Pa­cific Ltd. and Hutchi­son Port Hold­ings Ltd. have posted gains in profit this year on ris­ing de­mand for goods in­clud­ing Asian-made toys and fur­ni­ture. Chi­nese ex­ports rose 35.2 per­cent in the first six months of this year, cus­toms data showed.

" First-half growth has been steady with the re­bound in trade," said Ron­ald Wan, man­ag­ing di­rec­tor at China Mer­chants Se­cu­ri­ties Co. in Hong Kong.

China Mer­chants rose 0.4 per­cent to HK$26.05 dur­ing the Hong Kong mar­ket's 12:30 p.m. trad­ing break. The stock has gained 3.2 per­cent this year, com­pared with a 5.2 per­cent de­cline for the bench­mark Hang Seng In­dex. China Mer­chants' first-half con­tainer vol­ume rose 22.5 per­cent to 24.9 mil­lion 20-foot equiv­a­lent boxes, it said in the state­ment. Bulk car­goes rose 25.3 per­cent to 135.4 mil­lion tons, the com­pany said. The com­pany pro­posed an in­terim div­i­dend of 25 HK cents, same as a year ear­lier. -Bloomberg

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