Government still committed to CAL share sale, Lin says

The top shareholder in China Airlines Co (CAL, 華航) reiterated yesterday that it plans to sell a 30 percent stake in the airline by the end of this year and another 6 percent stake next year.

The sale was delayed in June due to the outbreak of SARS, as many analysts pointed out that that was a particularly unfavorable time for China Airlines to carry out its plan.

"The proposal will be reviewed by our board next month when they meet," Lin Chun-cheng (林純正), chief secretary of China Aviation Development Foundation (航發會), said yesterday.

The foundation, headed by Minister of Transportation and Communications Lin Ling-san (林陵三), has a 71.65 percent stake in China Airlines. The government plans to sell the foundation's stake in CAL by the end of 2005, Lin said in April.

Taiwan International Securities Corp (金鼎證券), selected by the foundation as the financial adviser for the sale last month, proposed details of the planned sale Wednesday, suggesting a bottom price of NT$18 per share, Lin Chun-cheng said.

Although the price is based on China Airlines' net worth, an analyst said investors won't buy for such high prices. He said a reasonable price would fall between NT$16 and NT$18.

"As the economy is rebounding, China Airlines shares are able to reach NT$16, but it might be difficult for the stock to hit NT$18," said Peter Tseng (曾耀德), an aviation industry analyst at Polaris Securities Co (寶來證券).

However, the real hurdle of the share sale is not the price, but the difficulty in finding buyers, he added.

"Most foreign investors lack interest in China Airlines and seldom can local strategic investors afford to acquire such a large number of shares at one time," Tseng said.

But Lin Chun-cheng said that the floor price would never go below the airline's net-asset value of NT$16.23 per share. He said theshare sale would add NT$15 billion to government coffers.

China Airlines shares dropped NT$0.1, or 0.7 percent, to close at NT$13.9 on the TAIEX yesterday.