China Shipping Container Lines Co aims to list in Shanghai by the end of this year to fund its purchase of container assets from its parent and to expand its fleet by 44 percent over the next few years, sending its shares to a record high.
Known as CSCL, the world's No. 6 container ship operator plans to issue up to a fifth of its enlarged share capital, worth US$1.6 billion based on current prices, Executive Director Huang Xiaowen told Reuters.
We have a very young fleet, which is more cost effective. We're now looking to expand and buy more ships, Huang said in a telephone interview.
About two-thirds of the money raised will go towards buying ships to increase capacity to more than 630,000 20-foot-equivalent units (TEU) in 2012 from 437,000 TEU at the end of September, Huang said ahead of the 10th anniversary of the company's founding.
He said the company had ordered eight 13,300 TEU container vessels from South Korea's Samsung Heavy, with the first to be delivered in 2010.
CSCL shares jumped to an all-time peak of HK$8.29 before ending Monday trade up 18 percent at HK$8.22, far outstripping a 3.5 percent gain in the index of Chinese firms listed in Hog Kong.
The jump was a belated response to its solid third-quarter operating data, released late on Thursday, and the latest details on its A-share plan, said Geoffrey Cheng, an analyst at Daiwa Institute of Research.
CSCL reported a 30 percent rise in third-quarter revenue to 11.04 billion yuan ($1.47 billion) last week.
The stock has risen 51 percent in the past month, although it has lagged a 74 percent surge by its rival, China COSCO Holdings, over the same period.
Like rivals China COSCO and Orient Overseas (International), CSCL is expanding to tap an international trade boom largely fuelled by global demand for goods made in China, the world's No. 3 trading nation.
The company signed a contract in August to buy ships of 13,300 TEUs each, the largest in the world, for a total of US$1.36 billion. Ship operators are looking for bigger and bigger ships to serve booming trade and cut costs.
PORTS AS WELL
The rest of the share proceeds will be used to buy assets such as container ports and container manufacturing plants from its state-owned parent.
Huang said its parent has eight container terminals with 30 berths in China and one in Los Angeles. It owns three container manufacturing plants and two joint ventures with a total annual capacity of about 500,000 TEUs.
CSCL will focus on container shipping, but at the same time develop container ports as a complement, he added.
Surging trade volume and a recovery of freight rates for the Asia-to-Europe route have boosted container shipping stocks. But some analysts remain cautious amid high oil costs and fears that a slowing U.S. economy could dent Asia-U.S. trade growth.
The company moved 34 percent more boxes in the third quarter to 1.93 million TEUs, but average revenue per unit was down 2.9 percent to 5,725 yuan per TEU as average revenue for its Asia-U.S. route fell 10.4 percent.
Trades ex-Asia performed well, Citigroup said in a recent research note. Transpacific was weaker than expected.
Huang expects CSCL's transpacific operations to improve next year as shipping firms plan to control capacity on the Asia-U.S. route by boosting freight rates and passing on high inland transportation costs to customers.
China's rising status as a global power should underpin the company's business, Huang said.
We have a huge space for development because of our dominant Chinese position, he said.