China Merchants Securities: The Merger Of Sinop Shipping And Hang Hang Phoenix Is A Bad Idea.

In December 23rd, Yu Huangyan, a researcher at China Merchants Securities (Hongkong) research department, released a research report that the merger of 0368.HK and 000520.SZ is a bad idea. If the merger is implemented, the business and profitability of Sino foreign shipping will be dragged down, and the consequences of "1+1<1" are likely to result.

He said that the origin of the merger between Sino-foreign shipping and Changhang Phoenix was rooted in the establishment of Sino-foreign Changhang group, but the establishment of Sinop Changhang group itself was a failure.

By the end of 2008, the former Sinop Group merged with the original Changhang group. However, the two major groups have been completely inconsistent for two years, causing some internal friction and affecting the speed of reform and development of their subsidiaries.

Yu Huangyan believes that the long voyage Phoenix not only has poor profitability, but also has a blind expansion of state-owned enterprises, and in 2009, the company lost 410 million yuan. At the end of the year, its net assets were only 1 billion 30 million yuan and its assets liabilities ratio was as high as 82%. At the same time, the total investment of ships purchased in 2010-2011 years was about 5 times that of the company's net assets. While Sinop had strong profitability and steady operation, its profit in 2009 was 730 million yuan, net assets at the end of the year were 13 billion 890 million yuan, assets and liabilities ratio was only 2%, and the capacity expansion in the 2010-2012 year was faster, but it would not be out of control, and the management style of the management was steady and the degree of marketization was high.

"The pport capacity of the two companies is close to each other; the business models and ship types are quite different; the differences in asset liability structure are too large; the management style and the business difference are large, so it is difficult to integrate", Yu Huang Yan said frankly, if the merger is implemented, it is difficult to complete the integration, and Sinop shipping business and profitability will inevitably be dragged down.

Public information shows that Chinese and foreign shipping is a mode of ship leasing for international market, with a small number of personnel. Large ship is the main type of ship. The current capacity is about 2 million 200 thousand deadweight tonnage. The long voyage Phoenix is a self operated mode of the Yangtze and coastal ships, with a small size and a large number of personnel, and the current capacity is about 2 million 400 thousand deadweight tonnage.

Yu Huangyan believes that although Sinop has a high degree of marketization and strong profitability, Sinop is unable to integrate its long business Phoenix with its own corporate culture and system.

The long voyage Phoenix has high liabilities and poor performance. It has no experience in the international shipping market and can not integrate Chinese and foreign shipping.

According to public information, the long flight Phoenix has 10711 employees at the end of 2009, and few Chinese and foreign shipping personnel. At the end of 2009, there were only 104 staff on the shore.

Recently, there have been media reports that Sinop Group has proposed to promote the integration and merger of Sinop shipping and Changhang Phoenix.