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PR Newswire
25-07-2011, 06:30 AM
For this week, it is Xinren Aluminium.
Jul 25, 2011
EYE ON XINREN ALUMINUM HOLDINGS
Company dangles dividend lure
This is a weekly series of interviews with the head honchos of Chinese companies listed here. Jonathan Kwok looks at the business challenges these companies face and the steps they are taking to improve their corporate governance.
LIKE many other China-based companies, XinRen Aluminum Holdings is suffering from low valuations on the Singapore Exchange (SGX) but the company insists it has 'no regrets' coming here.
Singapore is a good, international stock market which is best for the firm in the long run, said executive chairman Zeng Chaoyi. But he added simply that 'the share price is not good enough' in Singapore.
Executive director Liang Hongbo said in Mandarin: 'We never regret things. We just do what we think is best, and now we hope we can raise our valuations.'
Despite the upbeat attitude, the firm, which produces aluminium metal for various industries, is trading significantly under its initial public offering (IPO) price when it listed last year.
XinRen initially sold its shares to investors for 55 cents a piece, but the counter closed last Friday at 38 cents - 31 per cent below the IPO price. This meant the market valued the firm at $417 million, down from $604 million during the IPO.
XinRen also pointed out that it is trading at lower valuations than its peers in Hong Kong. For instance, China Hongqiao Group, also an aluminium producer, last traded in Hong Kong at HK$6.65 - giving it a historical price-earnings ratio of about 6.6, more than XinRen's ratio of 4.9. Price-earnings ratio is a commonly used method to value shares - the higher the ratio, the stronger the share price.
XinRen thinks the low valuations are because investors here do not understand its business or the China market enough, whereas Hong Kong investors may have a clearer picture due to their proximity to the mainland.
The company operates an aluminium smelting plant in Hubei province, and another in Guizhou province. They have a combined annual production capacity of 275,000 tonnes. The firm also has a plant in Jiangsu province which makes aluminium sheets, coils and foils.
It says costs should be contained due to its long-term supply contracts with large suppliers of Chinese alumina, which is used to make aluminium. Yet, it expects to benefit from higher aluminium prices as industries in China and overseas use more of the metal.
'People don't understand, it's a sellers' market for aluminium,' said Mr Zeng. 'People pay on collection of the metal, and we don't extend credit.'
The firm could also be suffering from generally dampened sentiment for China stocks, after a spate of high-profile corporate and accounting scandals at these so-called 'S-chips'.
Also, investors may be cautious that XinRen is a family firm, with the board dominated by members of the same family. But observers add that no particular red flags have been raised over XinRen.
XinRen is led by Mr Zeng, 41, and his 28-year-old brother Chaolin, the chief executive. Their sister Mingliu, 39, is on the board, as is their father, Mr Zeng Xiaoqiao, a 65-year-old industry veteran who started the company in 2002.
The fifth and last executive director, Mr Liang, 35, is married to the founder's daughter, Ms Zeng Hong.
The three independent directors are not related to the family.
The firm has outlined some measures to help support the share price. For instance, it conducted share buybacks using internal funds last month. Top shareholders have also been increasing their stakes, of their own accord. In two separate trading sessions this month, Yan-sheng, an investment vehicle owned by the controlling family, snapped up three million shares on the open market.
Mr Zeng Chaoyi also wants to tell investors that XinRen 'will consider' paying out a maiden dividend this year, even though it is a relative newcomer to the local bourse.
He added that he and his executive directors visit Singapore once or twice every quarter to hold the board meeting and meet shareholders.
The firm also stressed that it has been in Singapore since 2006, using it as a base for its international exports and trade. In fact, Mr Zeng Chaoyi and Mr Liang are Singapore permanent residents.
It is this link to Singapore that prompted them to list here, said Mr Zeng.
XinRen has also attracted coverage from DBS Vickers analysts. The brokerage's last update was in May, when it said that XinRen's first-quarter results came below estimates due to higher costs, but it registered relatively stable margins compared to its peers.
DBS Vickers cut the price target on the stock from 76 cents to 73 cents, but maintained its 'buy' call due to XinRen's 'undemanding valuation and relatively stable profitability compared to China peers'.
jonkwok@sph.com.sg
-------------------------------------
All in the family
FAMILY ties figure strongly in the management team at XinRen Aluminum.
But its members are old hands in the business.
Founder Zeng Xiaoqiao has been in the aluminium business for more than 30 years. In 2005, he was named one of the 18 most influential players in the non-ferrous metal industry in China by China Non-ferrous Metals News.
Before starting XinRen, he had founded other aluminium firms he subsequently sold off.
Executive chairman Zeng Chaoyi, a son of the founder, has 17 years of experience in the business working for his father.
Sister Mingliu, an executive director, is as experienced as her brother.
Jul 25, 2011
EYE ON XINREN ALUMINUM HOLDINGS
Company dangles dividend lure
This is a weekly series of interviews with the head honchos of Chinese companies listed here. Jonathan Kwok looks at the business challenges these companies face and the steps they are taking to improve their corporate governance.
LIKE many other China-based companies, XinRen Aluminum Holdings is suffering from low valuations on the Singapore Exchange (SGX) but the company insists it has 'no regrets' coming here.
Singapore is a good, international stock market which is best for the firm in the long run, said executive chairman Zeng Chaoyi. But he added simply that 'the share price is not good enough' in Singapore.
Executive director Liang Hongbo said in Mandarin: 'We never regret things. We just do what we think is best, and now we hope we can raise our valuations.'
Despite the upbeat attitude, the firm, which produces aluminium metal for various industries, is trading significantly under its initial public offering (IPO) price when it listed last year.
XinRen initially sold its shares to investors for 55 cents a piece, but the counter closed last Friday at 38 cents - 31 per cent below the IPO price. This meant the market valued the firm at $417 million, down from $604 million during the IPO.
XinRen also pointed out that it is trading at lower valuations than its peers in Hong Kong. For instance, China Hongqiao Group, also an aluminium producer, last traded in Hong Kong at HK$6.65 - giving it a historical price-earnings ratio of about 6.6, more than XinRen's ratio of 4.9. Price-earnings ratio is a commonly used method to value shares - the higher the ratio, the stronger the share price.
XinRen thinks the low valuations are because investors here do not understand its business or the China market enough, whereas Hong Kong investors may have a clearer picture due to their proximity to the mainland.
The company operates an aluminium smelting plant in Hubei province, and another in Guizhou province. They have a combined annual production capacity of 275,000 tonnes. The firm also has a plant in Jiangsu province which makes aluminium sheets, coils and foils.
It says costs should be contained due to its long-term supply contracts with large suppliers of Chinese alumina, which is used to make aluminium. Yet, it expects to benefit from higher aluminium prices as industries in China and overseas use more of the metal.
'People don't understand, it's a sellers' market for aluminium,' said Mr Zeng. 'People pay on collection of the metal, and we don't extend credit.'
The firm could also be suffering from generally dampened sentiment for China stocks, after a spate of high-profile corporate and accounting scandals at these so-called 'S-chips'.
Also, investors may be cautious that XinRen is a family firm, with the board dominated by members of the same family. But observers add that no particular red flags have been raised over XinRen.
XinRen is led by Mr Zeng, 41, and his 28-year-old brother Chaolin, the chief executive. Their sister Mingliu, 39, is on the board, as is their father, Mr Zeng Xiaoqiao, a 65-year-old industry veteran who started the company in 2002.
The fifth and last executive director, Mr Liang, 35, is married to the founder's daughter, Ms Zeng Hong.
The three independent directors are not related to the family.
The firm has outlined some measures to help support the share price. For instance, it conducted share buybacks using internal funds last month. Top shareholders have also been increasing their stakes, of their own accord. In two separate trading sessions this month, Yan-sheng, an investment vehicle owned by the controlling family, snapped up three million shares on the open market.
Mr Zeng Chaoyi also wants to tell investors that XinRen 'will consider' paying out a maiden dividend this year, even though it is a relative newcomer to the local bourse.
He added that he and his executive directors visit Singapore once or twice every quarter to hold the board meeting and meet shareholders.
The firm also stressed that it has been in Singapore since 2006, using it as a base for its international exports and trade. In fact, Mr Zeng Chaoyi and Mr Liang are Singapore permanent residents.
It is this link to Singapore that prompted them to list here, said Mr Zeng.
XinRen has also attracted coverage from DBS Vickers analysts. The brokerage's last update was in May, when it said that XinRen's first-quarter results came below estimates due to higher costs, but it registered relatively stable margins compared to its peers.
DBS Vickers cut the price target on the stock from 76 cents to 73 cents, but maintained its 'buy' call due to XinRen's 'undemanding valuation and relatively stable profitability compared to China peers'.
jonkwok@sph.com.sg
-------------------------------------
All in the family
FAMILY ties figure strongly in the management team at XinRen Aluminum.
But its members are old hands in the business.
Founder Zeng Xiaoqiao has been in the aluminium business for more than 30 years. In 2005, he was named one of the 18 most influential players in the non-ferrous metal industry in China by China Non-ferrous Metals News.
Before starting XinRen, he had founded other aluminium firms he subsequently sold off.
Executive chairman Zeng Chaoyi, a son of the founder, has 17 years of experience in the business working for his father.
Sister Mingliu, an executive director, is as experienced as her brother.
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