China Cosco Holdings Co. (1919), the nation’s biggest shipping company, slumped the most in about 10 months in Hong Kong trading after unveiling a plan to sell its logistics unit to help return to profitability.
The company dropped as much as 6.3 percent to HK$4.04, headed for the biggest decline since May 14. The shares fell 5.3 percent to HK$4.08 as of 2:10 p.m. in Hong Kong, while the city’s benchmark Hang Seng Index lost 0.4 percent.
China Cosco proposed to sell all its stake in closely held Cosco Logistics (Group) Co. to its state-backed parent, the company said in a filing yesterday, without disclosing financial details. The shipping company will use gains from the sale to boost operating results in 2013 and reduce the risk of its stock being suspended from trading on the A-share market, the Tianjin, China-based operator said in a separate statement.
“Selling a profitable unit for the sake of a one-off gain is viewed negatively by investors from a long-term perspective,” said Kelvin Lau, a Hong Kong-based transport analyst at Daiwa Securities Group Inc., who rates the shares buy. “It would be better if the company could manage to sell the loss-making dry-bulk assets instead.”
Cosco’s logistics unit made an operating profit of 388 million yuan ($64 million) in the first six months of 2012, compared with a 1.3 billion-yuan operating loss from its container shipping unit and a loss of 3.4 billion yuan from the dry-bulk fleet, according to a company statement.
China Cosco, headed by Chairman Wei Jiafu, is facing trading restrictions on its shares in China this year after saying it expects to post a substantial loss in 2012.
The company may get a “special treatment” designation that cuts the daily trading limit to 5 percent from 10 percent, according to listing rules by the Shanghai Stock Exchange. Companies that post annual losses for two consecutive years get that designation and may face a trading suspension if losses are recorded for a third year.
China Cosco, which has yet to report 2012 results, probably had a net loss of 7.1 billion yuan last year, based on the average of eight estimates compiled by Bloomberg. The shipper is contending with higher fuel costs and slumping freight rates because of worldwide overcapacity.
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