Yangzijiang plans secondary listing in HK or Taiwan

YANGZIJIANG Shipbuilding is the latest to disclose that it is jumping on the bandwagon of dual listings, as this trend looks set to stay this year.


This S-chip is planning to undertake a dual listing in Hong Kong or Taiwan this year to fund its venture into ship breaking business and potential mergers and acquisitions, according to a CIMB-GK report released yesterday. Its analyst Ho Choon Seng said the dilution is limited to 5 per cent.

A Yangzijiang spokesman told BT yesterday that 'this is in the planning stage but the exact timing is not fixed yet'.

The group is among a handful of S-chips that attended a three-day investor conference in Shanghai that ended yesterday. They met more than 200 funds from the US, Europe, Hong Kong and China.

The other six companies are Changjiang Fertilizer, C&O Pharmaceutical, C&G Industrial, China Hu An Cable, China Kunda and GMG Global. GMG is 51 per cent owned by Shanghai-listed Sinochem.

The conference, 'Halter Financial Summit 2010', was organised by Halter Financial Group. According to Financial PR, which is a partner for the event, more than 70 companies from four markets - the US, London, Singapore and Hong Kong - took part in the conference.

CIMB-GK's Mr Ho said he believes 'attractive risk-reward opportunities still exist in the S-chip space as investor confidence and interest in the space is still recovering'.

'We believe that most of the S-chips which were not directly associated with the negative publicity during the last crisis have stronger fundamentals and are less likely to repeat the mistakes which brought down their peers,' he added.

Sound Global (formerly Epure) and Yangzijiang are his top picks with 'outperform' ratings on potential upside of 39 per cent and 25 per cent respectively. Key catalysts are coming from more newsflow on dual listings and new order wins, he said. Yangzijiang is also more attractively traded at nine times CY11 price-earnings ratio compared to Cosco Corp's 20 times CY11 PE.

Dual listings are likely to remain a key theme in the S-chip space this year, Mr Ho reckons. Companies that are currently undertaking dual listings in Hong Kong include Midas and Sound Global, while China Fishery is headed for a secondary listing on Oslo Bors.

Shares of China XLX and Z-Obee traded in Singapore are now respectively 19 per cent and 36 per cent higher since their dual listings in Hong Kong.

But Mr Ho foresees that in the case of Yangzijiang, the impact of a dual listing on its trading multiples here would be small, so any re-rating of the stock would be mainly driven by fundamentals.

Since Taiwan Depository Receipts (TDRs) are non-fungible, issuing TDRs is unlikely to cause a sustained surge in the Singapore Exchange-listed shares here, he said. 'Alternatively, even if the company chooses to list in Hong Kong, there is no valuation gap with the Hong Kong-listed peer (Guangzhou Shipyard).'

At present...the best of the lot is SoundGlobal as it just broke peak on last Friday at $0.98 and it's last done price is at $1.01 and the next best one is Midas. Midas also just broke peak last Friday at $1.06 and closed at $1.09 but on low volume. Therefore if on Monday...it has volume then it will be a good buy at price nearer to $1.07! As for Yangzijiang...it's has gone up above 6% > BP, therefore must wait for pullback.