Pork giant WH Group makes it to Hong Kong MSCI family
Updated: 2014-11-08 07:43
By Celia Chen and Hua Yang in Hong Kong(HK Edition)
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WH Group remains upbeat about the pork industry, projecting that pork prices will climb towards the end of the year, with more Chinese consumers snapping up pork products during the cold, festive season. Provided to China Daily |
WH Group Ltd - the world biggest pork packer and parent company of Henan Shuanghui Investment & Development Co Ltd - joined the list of constituent stocks in the MSCI Hong Kong Index on Friday for its huge market capitalization and leading position in the global pork industry.
Underpinned by its new status, WH Group's share price hit a 10-day high in early trading on Friday, surging by 1.36 percent to HK$5.22 apiece amid the local stock market's downward trend. Despite the spurt, many stock analysts remain skeptical of the company's future performance which, they said, could be depressed by declining sales of pork products on the mainland market.
"I don't expect WH Group to benefit much from its MSCI Hong Kong index inclusion. Investors are worried about China's slowing economic growth that could hit many large enterprises," Kenny Tang Sing-hing, head of research at Redford Asset Management Ltd, told China Daily.
WH Group's past performance hasn't inspired much confidence either. Its largest mainland subsidiary, Henan Shuanghui, said on Oct 24 its net profit for the third quarter of this year dived 15.7 percent to 965.3 million yuan, compared with a year ago.
The group's first IPO in Hong Kong, slated for April this year, was aborted due to lack of interest among institutional investors. In its second attempt in July, the group raised about $2.05 billion - about half of what it had intended to raise initially.
"A 'butchered' IPO and a disappointing set of post-IPO results are not the best way to start life as a listed company," said Adrian Foulger, an equity researcher from Standard Chartered, in a report. WH Group's shares have been trading at below its IPO price of HK$6.20 apiece, and closed at HK$5.15 on Friday.
"The group's shares have come down a lot from their market debut and the turbulence could continue in the near future. We need to wait and see its next operating results," Ben Kwong Man-bun, chief operating officer of KGI Hong Kong, told China Daily. "Earnings prospects are still the primary concern of investors."
Guo Lijun, chief executive officer of WH Group, said earlier this month the company's mid-to-long-term strategies will not be affected by its fluctuating share price.
"The money raised from its slimmed-down IPO was to pay down some of its borrowings to fund its purchase of Smithfield Foods Inc in 2013. As the group failed to get the valuation it wanted from its IPO, the debt gearing problem remains unsolved," Tang said.
Tang noted that it's quite reasonable for MSCI to include WH Group for the size of its market capitalization and liquidity. As a leader in the global pork industry, WH Group offers diversification into the meat processing business.
Zhang Taixi, president of Henan Shuanghui, projected that the price of pork will climb slightly in the fourth quarter mainly because of the cold weather when Chinese people traditionally consume more meat products.
MSCI Hong Kong Index is the abbreviation for Morgan Stanley Capital International Hong Kong Index, which is designed to measure the performance of large-and-mid-cap segments of the Hong Kong market.
Contact the writers at celia@chinadailyhk.com and amandahua@chinadailyhk.com
(HK Edition 11/08/2014 page10)