New Billionaire’s Wealth Pumped by China Power Generator

Cao Kejian, chairman of Zhejiang Kaishan Compressor Co., became a billionaire since the start of this year after shares of China’s largest air compressor maker climbed more than 50 percent in four months on a new product.

The company has manufactured a new screw expander, power-generating machinery that helps convert water and exhaust gas to electricity, the company said in a Jan. 7 statement. It will start selling it globally.

“Kaishan’s technology is market leading globally and it has cost and distribution network advantages,” said Xu Minle, a Shanghai-based analyst at Bank of China International. He has a “buy” rating on the shares and attributes the stock’s gain to investors’ anticipation of the new product.

Cao, 50, has a net worth of $1.1 billion, according to the Bloomberg Billionaires Index. His wealth consists of 52 percent of Shenzhen-listed Kaishan Compressor and all of closely held Kaishan Group, according to data compiled by Bloomberg.

The screw expander will be sold to mines, chemical plants, steel mills and other industrial companies. It makes electricity using water above 80 degrees Celsius (176 degrees Fahrenheit), which is produced in the cooling process at a factory and is usually wasted. While a typical compressor pressurizes air to create heat, the screw expander uses heat from the water to produce kinetic energy.

Kaishan’s predecessor was founded in 1956 as the Communist Party consolidated companies that were previously privately held. It reverted back to a private company in 1998 as China’s policy makers allowed market economics to take hold.

Raising Stakes

Cao, chairman since 1998, has increased his stake in the company over the years. He owns 81 percent in Kaishan Group, which owns 56 percent in Kaishan Compressor, and has 6.5 percent in the listed company directly, according to Kaishan’s latest annual report in 2011. He declined to comment on his wealth.

Zhejiang Kaishan Compressor sold shares on China’s Nasdaq-like ChiNext in August 2011. Its shares have lost about 6 percent since the initial public offering. Profit may rise as much as 10 percent to 323 million yuan ($52 million) in 2012, it said in a Jan. 22 filing to the Shenzhen Stock Exchange.

The group, headquartered in Quzhou in eastern China’s Zhejiang province, has about 6,000 employees in five factories in Quzhou, Shanghai and Chongqing, and a network of 2,000 distributors throughout the country. It also exports to more than 60 countries, including the U.S., South Korea, Australia, Russia and Brazil. In 2009, it established a research center in Seattle, according to its website.

Company Valuation

The closely held Kaishan Group that Cao owns is valued at about $221 million, according to a calculation by Bloomberg. The estimate is based on the average price-to-earnings ratio of three publicly traded peers: Shanghai Highly (Group) Co., Huayi Compressor Co. and Sichuan Danfu Compressor Co.

The first screw expander will be delivered to Fairbanks, Alaska-based Chena Power LLC in February, according to a Jan. 7 filing to the Shenzhen Stock Exchange. Kaishan didn’t provide a value for the deal.

“Kaishan is the only major Chinese company that is capable of making such a device,” Guodu Securities Co. analyst Xiang Lei said in a phone interview from Beijing. “The product bodes well for Kaishan’s long-term growth, especially in the international market.” Xiang also rates the stock “buy”.

Kaishan will compete against Siemens AG and Ingersoll-Rand Plc, according to BOCI’s Xu.

Billionaires Minted

China’s economic growth accelerated for the first time in two years as the economy expanded 7.9 percent in the fourth quarter of 2012. Full-year gross domestic product rose 7.8 percent. The rebound may quicken in the first half as infrastructure projects are rolled out and the housing market picks up.

Hua Bangsong, the founder of Wison Engineering Services Co., became a billionaire after the company he started -- Wison Engineering -- raised more than HK$1.2 billion ($154 million) by selling shares in Hong Kong last month, according to a Jan. 24 Bloomberg report.

Sun Weijie, chairman of Yantai Jereh Oilfield Services Group Co., reached the billionaire level as shares of the Chinese oil equipment and service provider he co-founded surged to a record on news of a supply contract from Venezuela, Bloomberg reported Jan. 17.

The Bloomberg Billionaires Index takes measure of the world’s wealthiest people based on market and economic changes and Bloomberg News reporting. Each net worth figure is updated every business day at 5:30 p.m. in New York. The valuations are listed in U.S. dollars.

— With assistance by Michael Wei

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