Prosperity Minerals
Prosperity is an iron ore trader serving customers in the People's Republic of China (the 'PRC') and holds investments in entities involved in the manufacture and sale of cement and clinker in the same market.
Prosperity also has a real estate division and has recently entered into a number of conditional agreements designed to build up a portfolio of PRC property and development assets.
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Prosperity Minerals performing in line with expectations
Prosperity Minerals Holdings (LSE:PMHL) expects its full year performance to be in line with market expectations.
In a trading update before entering a close period ahead of November’s interim results, the company said it is looking forward with confidence.
It has been a time of great change for Prosperity after it offloaded the bulk of its cement operations to concentrate on iron ore and making a push into the Chinese real estate sector.^
This afternoon, Prosperity told investors that it shipped 2.8 million tonnes (Mt) of iron ore in the first six months, compared to 5.2Mt in the corresponding period of 2009 - which benefited from buoyant demand due to the Chinese government’s RMB 4 trillion stimulus package.
The company said it has broadly experienced the same trend as the wider market, with PRC’s austerity measures adversely affecting demand for iron and steel.
Prosperity highlighted that it has seen a recovery of iron ore import levels into the PRC from mid-September.
Additionally the company secured a new off-take deal during the period.
Prosperity Minerals said it is confident about the prospects for its newly formed property business.
At the 55%-owned Dongfang Wende Plaza in Guangzhou City, the company has decided to set back the pre-sale process until Q1 2011 to side-step the additional costs arising from the 2010 Asian Games.
Guangzhou is hosting the event in November, and like in Beijing before the Olympics, all construction work is being suspended through October to ease air pollution.
Consequently, the company highlighted that labour costs in the area have reached premiums of up to 30% in the lead up to the suspension.
“[We] chose not to be burdened by such cost escalation and prudently opted to re-schedule,” Prosperity said.
The company also emphasised that “regardless of when the pre-sales take place, the revenue and profit attributable to the pre-sales will not be recognised until the properties are completed and delivered to the buyers.”
This is expected at the end of the 2011-12 fiscal year.
Elsewhere at the Changzhou City development in the Fujian Province, Prosperity said it is currently finalising the design phase and building work will begin before the end of 2010.
The development complex will encompass recreation, commercial and residential property, including luxury accommodation and a ‘hot spring’ resort.
In reference to the share buy-back scheme, Prosperity said it was disappointed that it has not had a positive influence on the share price. The company is reviewing the current buy-back programme and it is also examining other alternatives for enhancing shareholder value.
Underpinning the company’s current valuation is the £315 million it made from selling the rump of its Chinese cement business to local rival TCC International in April.
Richard Nolan, analyst at the company’s broker and Nomad Daniel Stewart, calculates there is around £200 million of this sum left after the company invested in land and property assets in the People’s Republic (more of this later).
The current share price of 129p values Prosperity at just shy of £180 million, or at a 10 per cent discount to the company’s cash value.
Other Prosperity Minerals news
- Prosperity Minerals sees more domestic demand coming from China’s new 5 year plan
2010-11-30 - Prosperity Minerals completes acquisition of 25% stake in Liaoning Changqing Cement
2010-09-01 - Prosperity Minerals receives final payment from disposal of cement business
2010-08-21 - Prosperity Minerals to pay £70.1m for Guangzhou properties
2010-07-30 - Prosperity Minerals revenues hit US$849 million in FY09
2010-07-06
