Top Biz News

Shentong shares hit daily limits after Yu appointment

By Wei Tian and Zhou Yan (China Daily)
Updated: 2009-12-30 08:05

Shares of Shanghai Shentong Metro Co surged to daily limits yesterday after the city's Metro Line 1 operator appointed a new chairman, triggering hopes that the much-anticipated asset restructuring would start soon.

The company said in a statement yesterday that it has appointed Yu Guangyao, an industry veteran, as the new chairman.

The announcement comes a week after the subway operator was hit by an accident that grounded trains for several hours.

"The accident has forced the company to rejig its management structure and indications are that the new team would spearhead the asset restructuring," said Zhu Lixu, an analyst with Shanghai-based TX Investment Consulting.

With the Shanghai World Expo just round the corner, the local government is also likely to add more quality assets like Metro Line 2 and Line 4 to Shentong, the only listed subway operator in the city, to consolidate the metro operations, analysts said.

However, Shentong Metro didn't elaborate on the reasons for the management change or the fate of former chairman Zhang Yan.

The 50-year old Yu had over 32 years of working experience with the Shanghai Railway Bureau before taking over as president of Shentong's parent Shentong Group in September.

Shentong Group is a State-owned transportation conglomerate under the local State-owned Assets Supervision and Administration Commission, operating eight metro lines with a total length of 224 km in Shanghai. By 2012, the group is set to complete the city's rail transportation network with 13 lines and a total length of 500 km.

"Given the local government's need to revamp State-owned assets and the anticipated increase in traffic due to the World Expo, we expect the company's stock price to see further upswings," said Zhang Yongpan, an analyst with Qilu Securities.

Shentong shares jumped 10 percent to close at 12.3 yuan yesterday, the highest in 20 months.

The company's net profit in the third quarter of this year rose 7.8 percent from a year earlier to 23.5 million yuan. It also had a price/earnings ratio of 65 times when compared with the Shanghai bourse's average of 28.1 times.