Chinese Shipbuilder to list on London Market

LONDON (Dow Jones)–Chinese shipbuilder and shipping firm Dongfang Shipbuilding Co. expects its upcoming listing on London’s Alternative Investment Market to facilitate deals, and differentiate it from its many Asian peers by increasing its corporate governance and transparency.

Earlier this month the company said it plans to list on AIM by Aug. 18 through the admission of 190 million shares at no par value, giving it a market capitalization of around GBP32.3 million.

Finance Director Abdul Khader Mohamed Ismail told Dow Jones Newswires he doesn’t expect the listing to boost earnings in the short term, but it will help the company stand out from the crowd and ultimately capture more business.

“European customers in shipbuilding is a small club, mostly from Germany and Norway and that region,” he said, adding that this “small club” is served by a large Chinese ship-building market.

Ismail expects the increased transparency, corporate governance and publication of accounts resulting from its AIM listing to facilitate future deals where project financing is required or where advance payments to Dongfang are needed.

He also expects the listing to help lower the company’s debt repayments by around 3%, boosting its “bottom line by $6 million.”

Because of banking regulations in China, it is cheaper for banks to lend offshore rather than domestically, Ismail said. The company has around $180 million worth of debt with 12-13 Chinese banks. “We want to package it into, preferably, a good five-year syndicated loan,” he said.

The group’s main business is manufacturing small and medium-sized vessels, such as chemical tankers and multi-purpose container ships at its two shipbuilding yards in China’s Anhui and Zhejiang provinces.

Its first shipyard on the Ou River near Wenzhou, Zhejiang province, has a production capacity of around 100,000 deadweight tons a year with the potential to increase to 200,000 DWT. The site has 12 building slipways and three berths.

Its Anhui shipyard, in deep water along the Yangtze river, has six building slipways and an annual shipbuilding capacity of 400,000 DWT with the potential to rise to 500,000 DWT.

Dongfang said its shipbuilding strategy is to increase output to fully utilize the extra capacity at the Anhui shipyard.

As of June 30, the company had a shipbuilding order book of $89 million, with contracted delivery dates for new vessels and those under construction between August 2011 and January 2014.

Dongfang also owns and operates six 9,000-DWT chemical tankers and one 9,200-DWT ton chemical tanker, out of Singapore and Hong Kong. The shipping business diversifies revenue and helps mitigate the impact of long contract lead times in shipbuilding, it said.

Dongfang has 530 full-time employees across its two businesses.

-By Iain Packham, Dow Jones Newswires