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Guangshen Railway Co. Ltd. Message Board

  • rkarljr rkarljr Dec 28, 2004 7:42 PM Flag

    Proposed buy out of owned company

    Anyone have comments on the proposal to issue A shares for the purpose of buying out its own subsidiary? What would we gain from dilution?

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    • No problem. Their dividend payout is a little over .94 cents a year and they just had a dividend payment the end of December. Merrill has a "buy" on the stock and think that it should outperform all other banks in South Korea for the next five years. I think its alittle ahead of itself up here around $50 but its still okay. Dividend increase a distinct possibility!!!

    • Absolutely "no" dilution of share capital in the sale of A shares in Shanghai Stock exchange. Currently, the Chinese government owns 70% of Guangshen Railway. After the A share sales, the Chinese government ownership will drop to 40% of the company. Guangshen Railway will then trade on 3 stock exchanges: Hong Kong, Shanghai, and New York.

      • 1 Reply to PACMAN_2K
      • While it is true that the gov't percent ownership will decline, it is only inasmuch as yours and mine will decline. The government is not giving up any shares. GSH is adding a billion (or something like that) shares which will dilute our (and the gov'ts) ownership. The owner of the Pingshi line will receive 10 b RMB in cash after the billion extra shares are sold on the Shanghai market. By the way, the owner of the Pingshi line is also the Ch. gov't.
        Now, the other side of the coin is that GSH is receiving ~7b RMB of assets in this transaction. If you read my post from a few weeks ago (and if you believe GSH's projections), I think it is a fair deal. Please keep in mind that there are risks. Most prominent are that we are relying on projections that are hard to verify and a sale that involves GSH's controlling shareholder.
        However, I believe it leaves a ton of growth on the table for GSH if management is up to the task (and China doesn't take after Russia!)

 
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