The State-owned shipping and logistics conglomerate COSCO Group has received regulatory approval to sell its remaining stake in its real estate affiliate Cosco Development Co Ltd (CDC) to a foreign investor, the Shanghai-listed CDC said in an exchange filing yesterday.

 

CDC will then have its name changed to Shanghai Salin Wanye Co Ltd, reported the Security Times.

 

The equity transaction signals COSCO Group's exit from the real estate business, as urged by the State-owned Assets Supervision and Administration Commission (SASAC), analysts say.

 

In 2004 the commission issued a rule requiring State-owned enterprises under its direct administration to shed non-main business segments in order to reinforce their main businesses.

 

As real estate is the most common business the SOEs dabble in, the commission specifically ordered regrouping of real estate operations.

 

Although it is mainly engaged in global shipping and logistics services, the COSCO Group had diversified into real estate through its subsidiary COSCO Property Co Ltd, of which CDC was a wholly-owned listed part.

 

In 2002, the Indonesian company Success Medal International Limited (SMIL) acquired a 49 percent stake in COSCO Property Co Ltd and thereby changed its name to COSCO Salim Property Co Ltd.

 

COSCO Salim was ranked fourth among real estates companies in Shanghai that year. The company is known for the successful development of projects such as Liangwan City in Shanghai and the Asian Forum Centre in Boao, Hainan.

 

In July 2005, the COSCO Group put its remaining stake in COSCO Salim Property Co on public sale on the Shanghai United Assets and Equity Exchange, for a cash consideration of 958 million yuan (US$120 million). It was the largest equity offer by an SOE so far on a local equity bourse.

 

SMIL made a bid and now, having gained regulatory approval, the company is to take full control of the firm.

 

SMIL was established in the British Virgin Islands by Indonesians of Chinese origin, Lin Shaoliang and his father Lin Fengsheng. They are the main shareholders of the Sanlin Group.

 

The Sanlin Group is one of the biggest conglomerates in Indonesia, with businesses in South East Asia, Hong Kong, the US and Australia.

 

With total assets estimated at US$7 billion, Lin is said to be Indonesia's richest person and the world's sixth richest man.

 

However, analysts are being cautious about the Salin Group's involvement in the real estate market in Shanghai.

 

"Considerable price risk exists in the Yangtze Delta's property market and therefore we usually advise caution before investing in the market," said Sun Jianping, a Guotai Junan Securities analyst.

 

CDC's net profits dropped by 33 per cent last year to 27 million yuan (US$3.4 million), mainly due to a reduction in sales at its Liangwan project, the company said in its annual report filed to the Shanghai Stock Exchange yesterday.

 

Housing sales in Shanghai started to fall last June when the municipal government introduced a series of measures to cool the once red-hot market.

 

(China Daily March 22, 2006)