Sino Hua-An Int Bhd ... Jan 2009

Metallurgical coke producer Sino Hua-An International Bhd (Sino Hua-An) plans to bring in foreign institutional investors to boost the level of its foreign shareholdings.

The company has approached private equity and asset management arms in investment banks from the Western and Asean regions. The investors want to (be sure) where the business and industry (are headed) before proceeding with the acquisition.

Substantial Shareholders …
· Tunku Naquiyuddin Ibni Tuanku Jaafar: 28.2%
· Liu GuoDong: 15.9%
· Rise business Inc (Company owned by Zhu Qing Hua): 9.1%

The deal will to take up a block of their shares from the market but not through its major shareholders. None of the major shareholders are keen to sell their shares.

Foreign spread in Sino Hua-An have dropped to 8% from 20% previously, causing the share price to fall. It is unlikely for investors to come in now (Jan 2009) due to the uncertain market conditions. Nevertheless, the company will continue to try and entice them.

Sino Hua-An International Bhd’s plant in China

Going Forward …

The company has also put its acquisition and secondary listing plans on hold due to a slump in China’s steel market and the weaker market sentiment.

Sino Hua-An deferred its proposed acquisition of a 49% equity stake in Linyi Jiangxin Steel Co steel plant in Shandong Province in August 2008, worth an estimated RM500mil, as well as plans for a secondary listing, either Hong Kong or Singapore.

Sino Hua-An will concentrate on improving its existing core business for now (Jan 2009).

The company will observe the performance of the local steel industry before making any decisions on the possibility of setting up a plant in Malaysia

The coke that the company produces is one of the key raw materials in steel manufacturing, hence its sales are linked to the steel industry.

On Sino Hua-An’s financial performance, 2009 is expected to be better than last year. But all depends on the performance of the steel industry and China’s rollout of construction projects under their economic stimulus plan worth US$586bil.

It will like to maintain our 30% dividend payout policy but they have to balance it with our cashflow requirement and working capital. Sino Hua-An’s net cash position as at September was about RM65mil with zero gearing.

Demand for its products is expected to improve in the first quarter as global stockpiles diminish. Sino Hua-An’s coke products are consumed in China only and the unprecedented slowdown in the steel industry in the last six months has resulted in excess supplies.