Confidence Low, Goldman Still Gains

According to the 3Q Report released by Western Mining Co., Ltd. (601168), 1.224 bln restricted shares of the company became tradable on Jul 2008, topping that of listed companies and topping the number of shares sold in any company. Goldman Sachs Strategic Investments Delaware L.L.C., for instance, an affiliate of Goldman Sachs, cumulatively sold 31.70 mln shares of the company.

In 2006, Goldman Sachs bought 32.05 mln shares of the company before it was listed. Following the company’s constant stock dividend distributions, Goldman Sachs bought the shares at a mere RMB 0.34; and, if calculated by the listed RMB 32.97 per share, investment earnings are hundredfold.

Gone are the days of the hundredfold return rate windfall. The bearish Chinese market and the slipping non-ferrous metal sector is causing Goldman Sachs' confidence in the company’s development to wane, and they are gradually withdrawing its investment, according to Zhang Fang, an analyst at Tianxiang Investment Consulting. Even so, when calculated with RMB 6.32 per share of the company’s stock, it can still enjoy a twenty-fold return rate.

Fang believes that despite a hefty price adjustment in non-ferrous metals, the production volume is still on the rise, which will add to the huge inventory pressures later on in the year. In the context of a slowing global economy, demand for non-ferrous metals in the fourth quarter of 2008 and in 2009 will experience a sharp decline.

The company’s 3Q Report shows that the company’s net profit for the third quarter totals approximately RMB 283 mln, down 32.30%, while revenue rose 108% compared with the same period in 2007. The sharp decrease for the third quarter lies in the consolidated gross profit rate of 16.43%, which is down 23.2% YOY or 3.6% compared with the second quarter, clearly demonstrating weakening profitability.

According to data from Topview, the percentage of holders of legal person shares dropped from 61% at the end of Sept to 59.8% on 20 Oct 2008, exerting downward pressure on the company’s stock.


Source: National Business News

Date: 23 Oct 2008

CN01/BJ/JL/NK/KM