Share slide tipped for trade debut by shipper
June 29, 2005
Shares of China COSCO Holdings, the flagship of the mainland's biggest shipping company, may fall by 5 percent from the initial offer price in its trading debut tomorrow after receiving tepid response from retail investors, analysts and fund managers said.
China COSCO priced its shares at HK$4.25 each, the bottom of the range that went up to HK$5.75, raising HK$9.5 billion by selling 2.24 billion shares. It reset half of the shares alloted for retail investors, or 5 percent of the total, to institutional investors as the retail tranche failed to attract enough orders, sources said earlier.
“Investors' response to COSCO is no better than China Shenhua Energy so its performance on the first trading day also won't be better,'' said Partners Capital Asset Management chief investment officer Clive Zhang.
Shares of Shenhua, China's biggest coal producer, closed down 2.7 percent to HK$7.5 on the trading debut two weeks ago, although retail investors ordered 14.6 times more than the available shares.
China COSCO mainly comprises two units, wholly owned COSCO Container Lines and Hong Kong-listed conglomerate COSCO Pacific, and analysts are concerned that freight rates may have peaked, thus affecting its earnings. “Since part of its operation is risky and the investors' response is not good, the share price will face pressure on the trading debut,'' said APAC Capital assistant portfolio manager Tim Tse.
KGI Asia associate director Ben Kwong expects China COSCO's shares to fall 5 percent from offer price on debut while Tung Tai Securities associate director Kenny Tang expects the decline to be less than 10 percent.
Although China COSCO attracted well-known investors like Singapore's Temasek Holdings, Henderson Land Development chairman Lee Shau-kee and Hutchison Whampoa, who agreed to buy a combined US$400 million (HK$3.1 billion) shares, investors remained bearish on the outlook of the company.
The company reported 2004 net profit of 4.16 billion yuan (HK$3.9 billion), and it forecast profit this year to be at least 4.15 billion yuan.
HSBC, joint sponsor of the share offer, forecasts China COSCO's profit to fall to 3.54 billion yuan next year.
“Generally speaking, the prospect of the shipping industry and possible export slow down in China are the major concern for the stock,'' said PCI Investment Management senior investment analyst Surina Hui.