China Shipping Development Co. Ltd. will buy 42 dry bulk cargo carriers from its state parent for nearly US$314 million, boosting overall capacity about a fifth to try to capture strong demand in 2007.To help bankroll the purchase from controlling parent China Shipping (Group) Co., the listed firm -- one of the country's oldest and largest shipping firms -- intends to issue 2 billion yuan (US$254 million) in yuan-denominated convertible bonds.Analysts' reaction to the news was mixed and China Shipping Development's shares fell.Merrill Lynch downgraded the stock, saying it was time to cash out because any earnings or valuation boost to be had from the expansion had long been factored in. Merrill expects the purchase to contribute some 420 million yuan to 2007 net profit.Daiwa Institute of Research upgraded its six-month share price target to HK$9.60 from HK$7.50, representing a 16 percent gain from Thursday's close, citing an attractive purchase price for the vessels.Shares in the company slid 2.4 percent to finish Thursday at HK$8.26, lagging a 1.4 percent rally in the main market .
"The company is targeting expanding its international operation to capture the anticipated strong market next year," Daiwa's Rachel Tsang wrote in a research note.The stock has risen by about half their value this year.The Hong Kong-listed shipping group said the vessels to be bought included 32 China-registered and 10 foreign-registered carriers.
The deal would add 1.4 million deadweight tons to its existing fleet of 79 bulk carriers. Daiwa estimated the firm's vessel capacity at about 6.8 million deadweight tons.The bond issue would be underwritten by a syndicate led by China International Capital Corp. Ltd., it said. ($1=7.873 Yuan)
