Port of Dalian Group is sketching a new roadmap to cut through competition with a massive fundraising plan in the Hong Kong stock market, as China’s slowing trade momentum clouds the prospects for coastal ports, mostly controlled by local governments.
Dalian Port, the largest in northeast China and 10th largest in the world, realises its future can no longer depend solely on cargo volumes, and that providing value-added logistics and supply chain services is the formula for future sustainability in the absence of roaring trade.
“Gone are the days of quantity growth for Chinese ports. We need to look beyond the volumes,” said Dalian Port president Xu Song, who was in Hong Kong last week to tout the firm’s new strategies to prospective investors.
Dual-listed in Hong Kong and Shanghai, Dalian Port last month announced a plan to issue up to 1.48 billion H shares via a private placement – the largest fund-raising in the company’s history. The new shares represent 139 per cent of its existing H shares and 33 per cent of total shares listed.
Pricing is yet to be determined, but will not be lower than a 20 per cent discount to the average of the five trading days before the placement and the company’s year-end net asset value of HK$3.875 per share.
Most proceeds would be used to invest in “the integration of domestic and foreign ports”, as well as its oil, automotive and cold chain logistics services, the company said in an announcement to the exchange. The fund-raising was not only aimed at filling Dalian Port’s war chest, deputy general accountant Jia Wenjun said.
“We hope to attract long-term investors with whom we can find strategic synergy,” he said. “If we are only issuing shares to replenish capital, we’d be better off to do it in A-share market, where the premium is higher.”
When the markets closed on Friday, Dalian Port’s A-share price was three times higher than its H-share price.
North and northeast China ports that mainly handle commodity bulk cargo are under threat from a slump in iron ore and coal imports and intensive competition from neighbouring ports, Moody’s Investors Service said in a recent report.
Dalian Port, which derives 24 per cent of its revenue from handling crude and refined petroleum, says the key lies in regional consolidation.
“We are also raising the funds in preparation for potential consolidation opportunities,” Jia said. “We welcome consolidation in China’s coastal ports and would support any plans the government may have.”
Mergers among state-owned enterprises are a growing trend, heralded by the recent tie-up between train makers CNR and CSR. Other than Dalian, there are two other listed-ports in northeast China; Jinzhou and Yingkou. Dalian is the controlling shareholder in Shanghai-listed Jinzhou, with a 19 per cent stake.
