Uni-President Enterprises Corp (統一企業) yesterday said its China-based subsidiary would book an investment gain of about NT$1.44 billion (US$48.1 million) from disposing of shares in Want Want China Holdings Ltd (中國旺旺控股).
Analysts said the one-off gain could boost Uni-President China Holdings Ltd’s (UPCH, 統一中國控股) earnings for the year after the company reported weak financial results in the first half of the year.
Uni-President is Taiwan’s largest food producer and Want Want China claims to be the largest maker of rice cakes and flavored milk in China.
In a filing to the Taiwan Stock Exchange, Uni-President said its Hong Kong-listed Uni-President China sold all of its holdings in Want Want China for a total of NT$1.99 billion on Tuesday.
The filing said Uni-President China sold 47.1 million shares of Want Want China at prices between NT$36.92 and NT$47.38 per share. The company will use the proceeds to repay bank loans, according to the filing.
Nice Wang (王佳卉), an analyst with Yuanta Securities HK Co, said Uni-President China might use the money to fund expansion in its businesses, which include ready-to-drink tea, juice and instant noodle products.
“We believe UPCH sold its stake in Want Want to boost the cash it has available for ongoing capacity expansion,” Wang wrote in a note yesterday.
During an analyst meeting on Aug. 13, the company said capital expenditure this year would increase about 36 percent to 5 billion yuan (US$817 million), according to a note from Deutsche Bank analyst Winnie Mak (麥蔚誼) at that time.
“UPCH’s capacity expansion is on schedule, and our estimate that noodles and beverage production capacity will increase by 25 percent each for 2013 is unchanged,” Wang said.
During the first half of the year, Uni-President China’s profit rose 13.9 percent year-on-year to 575 million yuan, or 0.16 yuan per share, with revenue increasing 14.6 percent to 12.2 billion yuan over the same period.
However, its recurring earnings before interest and tax (EBIT) fell 21.6 percent year-on-year to 424 million yuan as its noodle business unit lost money in the first six months of the year amid a fierce competition with Tingyi (Cayman Islands) Holding Corp (康師傅控股), the largest instant noodle maker, known for its Master Kong (康師傅) brand.
Wang said Uni-President China could see its earnings per share increase by 22 percent to 0.36 yuan this year thanks to the one-off investment gain.
The disposal of Want Want shares is part of a divestment strategy that Uni-President Group has begun this year to sell non-core businesses, such as convenient store chain Hi-Life International Co (萊爾富) and LCD panel maker Innolux Corp (群創光電), to strengthen group members' financial structure. Uni-President China is also expected to sell its stake in Chinese beverage joint venture Jinmailang Drink (Beijing) Co (今麥郎) later this year.
Uni-President China is the second-largest contributor to Uni-President's second-quarter net profit of NT$2.87 billion, or 27 percent, after President Chain Store Corp's (統一超商) 36 percent, according to the Taiwanese parent firm's financial statement released last month.
Shares in Uni-President rose 0.37 percent to NT$54.8 in Taipei yesterday, but Uni-President China dropped 1.47 percent to HK$6.7 in Hong Kong, while Want Want China fell 2.1 percent to close at HK$11.20.