News / Yang Ming share trading halted as carrier moves to reduce share count

21/04/2017

Trading in the shares of embattled Taiwanese carrier Yang Ming were suspended on the Taipei stock exchange yesterday to allow the company to reduce its share count by over half.

The suspension is due to last until 4 May, as it decreases its share count from three billion to 1.4bn, a decline of 53%.

In a brief statement to the stock exchange, the company said the action was “making up losses”.

There won’t be any reduction in the company’s overall market capital, however, with the 1.4bn shares trading at NT$13.15 (US$0.4) compared with the current price of NT$6.15.

Since the turn of the year, Yang Ming has sought to reassure investors and customers it was heading towards financial security, with the Taiwanese government set to inject US$1.9bn and another US$54m to be raised in a rights issue with six Taiwanese investors.

This was accompanied by drastic salary cuts at the top level, with senior executive salaries reduced by 50% and line managers by 30%.

However, as The Loadstar has previously reported, these measures may not be enough to return Yang Ming to profit this year. Such is the depth of its debt and the strain its gearing – which reached 457% at the end of last year, according to Drewry Financial Research Services (DRFS) – puts on its balance sheet.

DFRS noted: “We reiterate our view that, despite the current capital reduction and the government’s bailout package, which is targeted towards rescuing the entire local industry and not just Yang Ming, the measures undertaken may seem insufficient unless Yang Ming raises more equity.”

And it added: “Despite a better outlook for freight rates in 2017, we believe high cost structure coupled with debt burden will keep Yang Ming in the red in 2017.

“Profitability can only be restored by a meaningful restructuring, driven by asset sales, debt restructuring and a large fresh capital infusion.”

DFRS valued the share price at NT$3.50.

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Brigstocke Lexden
April 22, 2017 at 3:28 pm
The Yang Ming share consolidation does not have any effect on the market capitalisation of the company. The market value of the company remains the same, there are simply a smaller number of shares which have a higher price. For example, if a company previously had one hundred shares with a market price of $1 (market capitalisation $100) following share consolidation it might have fifty shares with a market price of $2 (market capitalisation $100).

Share consolidation is legal and a normal market practice, which can be conducted for a number of reasons. But many commentators (including journalists) appear not to understand what share consolidation actually means. Yang Ming say that it is to ‘pare down accumulated loss’, but this is absolute rubbish and was probably written by a PR person with no understanding of the stock market.

The important part of the Yang Ming restructuring is the ‘private placement’ of new shares which will dilute the shareholdings of existing shareholders who were not asked to participate. The following is taken from the Yang Ming website:

“According to an exchange filing on February 7, 2017, Yang Ming will raise approximately NT$1.69bn (US$54.4m) by offering 161.33 million new shares at NT$10.48 per share to the following six institutions and companies: The National Development Fund of the Taiwan Government [“NDF”]; Taiwan Navigation Co.; Taiwan Chinachem; T3ex Global Holdings; Mercuries Life Insurance; and Superstar Investment.” Note that the NDF was already a Yang Ming shareholder.

This new money will improve the financial situation of the company, but existing shareholders who were not invited to participate will see their shareholdings diluted (they will now hold a smaller percentage of the ordinary shares issued by the company).

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- Ale Pasetti
  April 24, 2017 at 10:46 am
  Hi Brigstocke Lexden,
  
  Re: “The Yang Ming share consolidation does not have any effect on the market capitalisation of the company.”
  
  Gavin wrote:
  
  “There won’t be any reduction in the company’s overall market capital, however, with the 1.4bn shares trading at NT$13.15 (US$0.4) compared with the current price of NT$6.15.”
  
  Which clearly should read “market cap” — rather than “market capital” — but what it meant was pretty obvious, in my view.
  
  Re: “Yang Ming say that it is to ‘pare down accumulated loss’, but this is absolute rubbish and was probably written by a PR person with no understanding of the stock market.”
  
  Agreed.
  
  I don’t know what kind of press you read, but WSJ, RTR, BBG, and the FT are pretty good when it comes to reporting this stuff.
  
  Finally, I think we agreed $60m is a drop in the ocean?
  
  Thanks for your comment.
  
  Best,
  
  Ale
  
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