News Analysis: Zhuhai Port (000507 SZ) as a strategic shareholder

  • Zhuhai Port (000507 SZ) will become a strategic shareholder after acquiring 120m shares or 11.96% stake from controlling shareholder, Mr Zhang, at HK$7.68/share
  • Expect synergy with Zhuhai Port in development of new energy 
  • The transaction is positive to China Tian Lun Gas though there will be short term selling pressure
  • Maintain BUY with TP of HK$9.20

Zhuhai Port will acquire 120m shares or 11.96% stake of China Tian Lun Gas from controlling shareholder, Mr Zhang, at HK$7.68/share. The transaction price represents around 9% discount to the latest closing price. After the transaction, Mr Zhang’s stake in China Tian Lun Gas will decline from 67.92% to 55.96%.

Zhuhai Port has three main operations in China, including ports and logistics, new energy and manufacturing. Under the new energy segment, apart from gas distribution operation in Zhuhai and power generation business (including wind, solar, coal and gas), it has also made several acquisitions in the energy storage and hydrogen. Given China’s carbon neutral plan, Zhuhai Port will strive to become a diversified energy play. After the transaction, Zhuhai Port’s geographical reach in gas business will expand significantly. In addition, Zhuhai Port and China Tian Lun Gas can co-operate in the development of energy storage and hydrogen where China Tian Lun Gas has limited exposure currently.

Mr Zhang acquired 141m shares from IFC at HK$7.50 per share in mid-May. Thus, he did not make much profit from this transaction. Nevertheless, the deep discount of the transaction price will lead to some selling pressure. We see any share price weakness as good buying opportunities. Our TP is HK$9.20, based on DCF (1.5 beta, 9.5 WACC, 1% terminal growth)