Hong Kong: Shares of Hutchison Telecommunications International Ltd (HTIL) jumped more than 6% on Thursday after Egypt’s Orascom Telecom sold its remaining 14.2% stake in the firm.
Billionaire Li Ka-shing and his conglomerate flagship Hutchison Whampoa, the controlling shareholder of HTIL, agreed to buy the stake from Orascom for $960 million, or HK$11.00 per share, the companies said.
“It shows that they have enough confidence in (HTIL) to buy it back,” said Francis Leung, general manager at Fulbright Securities.
The sale eliminated a key stock overhang that Orascom had gradually been selling off since HTIL exited India’s booming market. Although HTIL still operates in emerging markets from Israel to Vietnam, analysts said Orascom’s main interest in HTIL had been its exposure to India.
Shares in HTIL hit a high of HK$11.98 before retreating slightly to HK$11.90, up 5.31% at 0310 GMT, beating a 1.34% rise the blue chip Hang Seng Index and a 1.09% gain for Hutchison shares.
“Hutchison and Mr. Li Ka-shing buying out the stake potentially drives the ‘value´ perception in the stock,” Citi said in a research note on Thursday.
Hutchison would buy a 9.2% stake for HK$4.85 billion ($622 million), lifting its interest in the unit to 59.33% from 50.11%, and Li’s private company, Yuda Ltd, would buy the remaining balance of 5% stake.
The two-year investment in HTIL generated an overall cash profit of $600 million for Orascom, the fourth-largest Arab mobile operator by market value. It bought a 19.3% stake in HTIL for $1.3 billion in December 2005.
Orascom said it had received a special cash dividend of $793 million in July after HTIL sold off its Indian mobile business, Hutch Essar, and $327 million from the sale of a 5% HTIL stake earlier this year.
Citi also said HTIL’s Indonesian operations had 1.6 million subscribers as of September though incremental average revenue per user (ARPU) was much lower than peer group ARPU. “We need more sustainable trends to gauge longer-term value,” it said.
Its cash balance is HK$8 per share at the end of June against net asset value of HK$11.15, estimated by Citi.
“The lack of immediate catalysts is what stops us from being more positive, although the elimiation of the Orascom stake overhang is a reason for some short-term cheer,” it added.