Singapore's largest supplier of ready-mixed concrete and cement is spinning off its Chinese port division ahead of a listing on the Hong Kong bourse. Pan-United Corp said yesterday that the "de-merger" of wholly owned unit Xinghua Port Holdings as a separate listed entity by the end of the year is expected to improve "investor visibility".
It said creating two pure-play businesses on different stock exchanges could help investors better assess the respective market values of the concrete and cement operation and the ports on a standalone basis.
Pan-United hopes to attract a more extensive analyst following and get easier access to international and North Asian investment funds that are familiar with the Chinese port sector.
As part of the de-merger, Xinghua plans to capitalise an existing $102 million inter-company loan extended by Pan-United into newly issued Xinghua shares.
Pan-United will also undertake a capital reduction exercise and distribution in specie of its entire stake in Xinghua to shareholders on the indicative basis of one Xinghua share for every two Pan-United shares.
Xinghua also intends to issue new shares comprising up to 5 per cent of its enlarged share capital under an incentive scheme that will benefit certain staff and business partners.
Separately, Pan-United aims to raise gross proceeds of $60.9 million through a renounceable non-underwritten rights issue of up to 141.6 million new shares. Each rights share will be issued at 43 cents on the basis of one rights share for every four existing ordinary shares. The proceeds will be used to partially retire Pan-United's external debt.
NRA Capital head of research Liu Jinshu noted that on completion of the exercise, Pan-United's net gearing ratio would drop from 0.73 as at Dec 31 to 0.12. "It's a good move because the group will have more financial headroom to expand in key markets like Malaysia and Vietnam... Shareholders... can get back some of their capital in the form of port shares, while considering whether to subscribe (to) the rights."
Xinghua operates two ports in China's Jiangsu province.
Although Pan-United's port business accounted for $91.9 million, or 13 per cent, of group revenue last year, overall, it represented 63 per cent, or $16.5 million, of profit after tax and non-controlling interests.
Yesterday, the group reported first-quarter net profit of $3.1 million, down 19 per cent from the same period a year earlier. Revenue in the three months to March 31 was $153.2 million, down 14 per cent from a year ago, owing to lower demand and selling prices for concrete and cement in Singapore, although cargo volumes handled in the two ports grew 6 per cent.
Pan-United shares closed one cent lower at 72 cents before trading was halted before the announcements yesterday.