China Hongqiao Group, the country’s largest private aluminium producer, aims to raise HK$11.68 billion (US$1.5 billion) from a share sale to fund projects and repay debt, capitalising on robust industry margins and a buoyant Hong Kong equity market.
The company planned to sell up to 400 million existing shares for HK$29.20 each, representing a 9.6 per cent discount to its closing price on Monday, according to a filing to the Hong Kong stock exchange on Tuesday.
“In view of the current capital market conditions, the board considers the placing and the subscription represent a good opportunity for the company to raise further capital for the company, while at the same time broadening its shareholder and capital base,” the filing said.
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Its shares slumped 7.7 per cent to HK$29.80 in early trading, trimming its gain to 153.4 per cent this year.
Aluminium is currently trading near a three-year high thanks to solid demand and measured supply. Photo: AFP alt=Aluminium is currently trading near a three-year high thanks to solid demand and measured supply. Photo: AFP>
The placed shares would account for about 4 per cent of China Hongqiao’s enlarged share capital, according to the filing. The company added that the offer price marked a premium of nearly 2.2 per cent to the average closing price of around HK$28.58 per share over the past 30 trading days.
The fundraising comes amid rising margins for the metal, with aluminium trading near a three-year high thanks to solid demand and measured supply.
“Aluminium remains one of our most preferred sectors as we expect supply to remain tight benefiting from China’s capacity cap policy and the absence of explosive capacity addition in Indonesia, resulting in higher-for-longer aluminium margins,” Citigroup analyst Jack Shang said in a note earlier this month.
The US bank raised China Hongqiao’s 12-month target price to HK$36 from HK$25.20, citing higher margins, superior profitability and an attractive shareholder return policy, as well as the management’s cautious stance on the company’s Indonesian project expansion.
China Hongqiao, Shandong Nanshan Aluminium and Tsingshan Holding Group are among the Chinese producers turning to the aluminium industry in Indonesia, Southeast Asia’s largest economy, with multibillion-dollar projects.
