Chinese School - Cosco raises 15b yuan to buy new ships

BIZCHINA / News

Cosco raises 15b yuan to buy new ships

(Shanghai Daily)
Updated: 2007-06-20 12:53

China Cosco Holdings Co, operator of Asia's largest container line, sold
15 billion yuan (US$1.97 billion) of stock in Shanghai to buy new ships.

Investors bought 1.78 billion shares at 8.48 yuan each, the top end of
the price range, on Monday, the company said in a Shanghai stock exchange
statement today. The sale was the fourth biggest in China this year,
according to Bloomberg data.

The company plans to use the funds to help its container-shipping unit
pay for 12 new ships and to buy a stake in a logistics company. Shipping
lines are adding more vessels as Wal-Mart Stores Inc and other retailers
sell more Asian-made clothes, toys and televisions in the US and Europe.

"The company needs to fund the expansion of its fleet and raising money
in China is very easy right now," said Ji Lijun, an analyst at Shanghai
Securities Co." The move is also in line with the government's directive
to list more state-owned companies on mainland stock markets."

The Tianjin-based company sold 535 million shares to strategic investors,
356.9 million to institutional investors and 891.9 million to individual
investors. Strategic investors have to hold their shares for a year,
while the lock-up period for institutional investors is three months, the
company said.

China International Capital Corp arranged the sale.

Chinese companies have sold more than 130 billion yuan (US$17 billion)
worth of shares in Shanghai and Shenzhen this year.

Ping An Insurance (Group) Co, the nation's second-largest insurer, raised
38.9 billion yuan in February in the largest domestic share sale this
year.

China Cosco plans to spend 6 billion yuan of the sale proceeds on new
vessels it has already ordered, according to a share sale document. It
will also use 1.68 billion yuan to buy a 51 percent stake in Cosco
Logistics from its state-owned parent Cosco Group and another 401 million
yuan for projects being developed by the logistics unit.

China Cosco had a total of 26 container vessels on order at the end of
2006, with a combined capacity of 166,320 twenty-foot boxes, it said in
March. Its Cosco Container Lines Co unit operated 139 vessels with a
combined capacity of 399,237 twenty-foot equivalent units at the end of
last year.

The price of ships is climbing because of higher demand. A new vessel
able to carry 6,200 20-foot standard containers cost a record US$105
million last month, 4 percent more than at the end of 2006, according to
Clarkson Plc, the world's biggest shipbroker. Shipowners ordered a record
US$105.5 billion worth of new vessels last year, according to the
London-based company.

Container-shipping rates have also gained this year. The Howe Robinson
Container Index, which tracks the charter market for container-shipping
lines on a weekly basis, stood at 1254.3 on June 13, according to the
Korea Maritime Institute. That's the highest since September 20.

Related readings:
China COSCO Shanghai IPO attracts massive demand
COSCO to go public in Shanghai
COSCO inks 4 domestic shipyards contracts

Find more in
Markets Watch 

"The outlook for the container-shipping industry has improved as freight
rates are recovering," said Karen Chan, an analyst at Credit Suisse Group
in Hong Kong. ``Hong Kong-listed mainland companies selling A shares in
the domestic market are also popular among investors. China Cosco is no
exception."

China Cosco raised HK$9.52 billion in an initial public offering in Hong
Kong in June 2005. The shares, which rose 2 percent to HK$11.10 at
10:15am in the city, have more than doubled from their IPO price.

China Cosco aims to find new revenue sources as the launch of new vessels
intensifies competition in the container-shipping industry. The global
container fleet's capacity may increase about 14 percent over the next
two years, while demand may expand 12 percent, Credit Suisse Group said
in a February 5 report.

AP Moeller-Maersk A/S, owner of the world's largest container line, had a
total capacity of 11.3 million units at the end of 2006, according to
Containerisation International.

China Cosco also owns a 51 percent stake in Cosco Pacific Ltd., Asia's
third-largest container terminal operator.

(For more biz stories, please visit Industry Updates)

Learn Chinese, Chinese School