Guangzhou Auto falls in Hong Kong on trading debut
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