Shift in Sinotrans structure offers growth potential
The restructuring within the Sinotrans group will be positive for both listed companies in the group, Sinotrans Ltd and Sinotrans Shipping, say analysts.
Sinotrans Ltd will dispose of its loss-making marine transportation business to its sister company, Sinotrans Shipping, to focus on its logistics services business, Dow Jones reported.
Morgan Stanley said the disposal would help stem losses and deleverage the balance sheet. It raised its target price on the stock by seven percent.
Though Sinotrans Shipping has to absorb the unprofitable shipping business, the dry bulk chartering business injected by the parent group will offer significant growth potential, says Credit Suisse.
It says the profitability of the chartering business is expected to improve with strengthening demand for dry bulk commodities. Credit Suisse says the company still has a large cash pile, equal to over 60 percent of its market value, after the deal.
