Sichuan New Hope shares suspended in Shenzhen

By Bao Chang (China Daily)
Updated: 2010-07-27 09:59
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BEIJING - Sichuan New Hope Agribusiness Co Ltd, the listed arm of China's largest animal-feed producer, New Hope Group, announced its share trading has been suspended for undisclosed reasons that may cause the company's share price to fluctuate irregularly.

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Industry experts said the reason behind the suspension may be that an unlisted subsidiary of the group - Shandong Liuhe Co Ltd - has plans in the works to inject capital into Sichuan New Hope. The Shenzhen-listed company declined to comment and did not signal when trading will resume.

Shandong Liuhe is China's largest poultry product processor and Shandong's top feed enterprise with more than 200 subsidiaries engaged in feed, animal husbandry and meatpacking.

"Combining the listed and unlisted assets is the inevitable choice for Liu Yonghao, president of New Hope Group, who wants to develop his company into a world-class agriculture enterprise," said Sun Guodong, an industry analyst at Qilu Securities.

According to Qilu Securities, meat sales of four unlisted units of Sichuan New Hope were eight times that of Sichuan New Hope last year. Meanwhile, their total sales revenue was 6.6 times the listed company.

Qilu Securities' Sun said that Shandong Liuhe is more likely to make the investment, because of its good asset quality and capacity for profitability.

According to Qilu Securities, the combined sales revenue of Liuhe was 40 billion yuan last year. While, that for Sichuan New Hope Agribusiness was 6.8 billion yuan, 6.4 percent lower than a year earlier.

New Hope Group acquired a 45 percent stake in Shandong Liuhe in 2005. According to Du Juan, head of the office of New Hope Group, Shandong Liuhe saw a 100 percent increase in its business every year since it joined New Hope.

Zhang Xu, an analyst at Shanxi Securities, said: "New Hope Group has always been discussing asset combinations which will be beneficial to the whole group."

Qilu Securities estimated a 32 percent increase in New Hope's sales, which is expected to hit 9 billion yuan in 2010.

By Friday, the share price of Sichuan New Hope Agribusiness on the Shenzhen exchange was 8.56 yuan, 64 percent lower than its highest price of 24 yuan per share in 2008.

Industry expert said it's a suitable time for Liuhe to make an investment because of the low share price.