Taipei--Shares in Taiwan Cement Corp. (??), one of the leading cement suppliers in the local market, faced downward pressure in the mid-morning session on Friday after the firm announced plans to delist its subsidiary from the Hong Kong Stock Exchange, dealers said.
The selling resulted from worries over the high premium the acquisition price offered by Taiwan Cement for the subsidiary, TCC International Holdings Ltd. (????), they said.
Taiwan Cement shares underperformed the broader market, which staged a technical rebound in response to gains posted on Wall Street after more companies reported an improvement in earnings, they added.
As of 11:18 a.m, shares in Taiwan Cement had fallen 2.06 percent to NT$35.70 (US$1.17), with 8.93 million shares changing hands on the Taiwan Stock Exchange, where the weighted index was up 0.83 percent at 9,713.02.
The stock initially moved higher in line with the broader market, but selling then emerged to push the share price into negative territory and to a low of NT$35.45 at one point on Friday morning.
"The high premium from the acquisition price, has made many investors jittery for the moment," Hua Nan Securities analyst Henry Miao said.
In a news conference held on Thursday, Taiwan Cement, which owns a 63.05 percent stake in TCC International Holdings, indicated it will acquire the remaining stake in the subsidiary for HK$3.6 (US$0.46) per share, a 38.5 percent premium over TCC International Holdings' closing price of HK$2.6 on the Hong Kong Stock Exchange on Tuesday.
According to the acquisition plan, Cayman Islands-registered TCC International Holdings' shareholders can either choose to receive cash or opt for a share swap with 0.42 of a Taiwan Cement share equal to one TCC International Holdings share. The acquisition plan is subject to regulatory approval from Taiwan, Hong Kong and the Cayman Islands.
"In addition, if the subsidiary's shareholders choose a share swap, an increase in new shares from Taiwan Cement is expected to dilute the parent's earnings to some extent and investors do not want to see that," Miao said.
After delisting TCC International Holdings, Taiwan Cement could list the unit on the China equity market, where valuations are comparatively higher than in Taiwan. "If the listing assumption comes true, it will be a boost to Taiwan Cement. But, right now, it is only a guess so investors prefer to cut their holdings in Taiwan Cement," Miao said.
"However, as Taiwan Cement is the largest cement maker in Taiwan with sound fundamentals, I expect the selling resulting from the acquisition plan to be short-lived and the stock is expected to find technical support at around NT$35," Miao said.
After taking TCC International Holdings under its corporate umbrella, Taiwan Cement is expected to post NT$2-2.12 in earnings per share in 2017, compared with an earlier estimate of NT$1.8, market analysts said.
Miao said that Taiwan Cement failed to sustain its early gains in the local equity market, which received a boost from a higher Wall Street, where the Dow Jones Industrial Average closed up 0.85 percent and the S&P 500 Index ended up 0.76 percent overnight.
"Thanks to the strength of large-cap stocks, the weighted index returned to 9,700 points," Miao said. Among the gaining stocks, Taiwan Semiconductor Manufacturing Co. (???), the most heavily weighted stock in the local market, had added 1.34 percent to reach NT$189.50 as of 11:18 a.m.
Source: Focus Taiwan News Channel