COSCO Pacific Ltd, an arm of China's largest shipping conglomerate, said yesterday the sale of its stake in a Hong Kong bank for US$268 million will free up capital to expand its terminal business and buy boxes.

The company, a port operator and the world's third-largest container leasing firm, also said it intended to dole out special dividends to investors from the gain of about US$90 million from the sale of a 20 percent stake in Chong Hing Bank Ltd.

"In the past, the company had issued special dividends after selling assets. This will be no exception," Xu Minjie, COSCO Pacific's vice chairman, told reporters yesterday.

COSCO Pacific is dedicated to strengthening and expanding terminal business in the second half, it said in a statement.

"Our port investment will focus on China but we are also looking at ports in the Suez Canel, Rotterdam and Panama Canal," Xu said.

Goldman Sachs upgraded COSCO Pacific to buy from neutral after the asset sale and revised up its target price for the stock to HK$25 per share from HK$23.

The stock ended up 5.62 percent at HK$20.3 yesterday.

"The disposal will generate an one-off gain of US$0.041 per share, equivalent to about 23 percent of our full-year 2007 earnings per share estimate," Morgan Stanley said.

The investment bank believed the transaction would likely to be followed by a series of terminal project investments.

COSCO invested in 119 berths, of which 83 were in operation and moved a total of 16 million twenty foot equivalent units (TEU) of goods in the first half, up 23 percent from a year earlier.

Its terminals are mainly in mainland China and the company also has stakes in COSCO-PSA Terminal Private Ltd in Singapore and Antwerp Gateway in Europe.

COSCO Pacific reported late last week an interim net profit of US$148.5 million, up 8.9 percent from a year earlier as robust growth of container terminal outweighed lower contributions from the box leasing arm after the disposal of 600,000 twenty foot equivalent units of containers last year.

Kevin Wong said the company would continue to sell down its container fleet and lease the boxes back for operation as its leasing arm was moving towards a capital light approach.

COSCO Pacific sold 36,453 TEUs of returned containers in the first half and planned to sell up to 150,000 TEU of boxes at a premium in the second half and lease them back.

It managed a container fleet of 1.4 million TEUs at the end of June, of which 52 percent was owned by the company.

The firm will also buy 280,000 to 310,000 TEUs of new containers this year.

Reuters

(HK Edition 08/28/2007 page6)