China: Kingway Brewery to unveil rights issue

Trading in shares of China's Kingway Brewery Holdings Ltd was frozen, pending details of an upcoming rights issue, expected to bankroll an ongoing business expansion, Reuters reported May 16.

A company spokesperson declined comment. Adding capacity � whether by expanding current plants or adding new ones � is proving cheaper than acquiring peers, Deutsche Bank said in a recent report.

Shares in Kingway closed on May 16 up 2.2%, after having shed 3.7% in the past 12 months.

"They are raising some money, which could be for expansion. But I doubt whether it is for acquisitions," said Alice Hui, an analyst for DBS Vickers.

Kingway -- which has a market value of roughly HK$4.5 billion (RM1.96 billion) -- has been building new plants at breakneck speed in the north, southwest and northwest of the country -- including plants in Tianjin, Chengdu, and Xian.

Last year, Chairman Ye Xuquan told Reuters the firm aimed to sell over one million tonnes of beer in 2007.

Its brands � including Kingway Classic, Kingway Draft, Kingway Gold, among others � are mainly sold in southern Guangdong province. Kingway -- about a fifth owned by Heineken NV via a joint venture -- commands over 50% of Shenzhen's market share, according to Deutsche Bank.

Nationwide, it competes with leading brand Tsingtao, and China Resources Snow Breweries, a venture between SABMiller Plc and beverage-to-retail giant China Resources Enterprise Ltd.

The beer market in China, where a 640-ml bottle can cost just 12 US cents (40.8 sen), is the world's largest by volume and grew nearly 15% to 351.5 million hectolitres in 2006, the third consecutive year of double-digit volume growth.

Beer sales in China grew 16% to 83.9 billion yuan (RM37.1 billion) in 2006, according to government data.