Sinotruk to Continue Buyback after $31 Million Outlay

Sinotruk (Hong Kong) Ltd., China's largest heavy-truck maker, plans to continue purchasing its own shares after spending HK$243 million ($31 million) on buybacks in less than three weeks.

"Our share price is very low and it's worth buying," Ni Guixiang, a spokesman for the Jinan-based truckmaker, said in a Dec. 5 phone interview. "We are more confident about investing in ourselves than putting the money into other stocks."

The Hong Kong-listed truckmaker has bought back about 2.4 percent of its stock, taking advantage of a 58 percent plunge in its share price this year and a 6 billion yuan ($872 million) cash pile. The stock fell, even after Sinotruk boosted first- half profit 40 percent and outperformed China's overall vehicle market.

"The buyback shows that Sinotruk's management is very confident about their sales prospect and profitability," said Vivien Chan, an analyst at SinoPac Securities Asia in Hong Kong. "Still, the company is facing a difficult market situation and demand may not pick up for the next six months."

The company has bought back about 55 million shares since Nov. 21, including 138,500 today, according to data compiled by Bloomberg. The truckmaker had 2.3 billion shares on June 30, according to the half-year report.

Sufficient Liquidity

"Relatively speaking, our liquidity is sufficient and our market is stable," Ma Chunji, chairman of Sinotruk, said in an interview in Tianjin last month. "The government's policy of stimulating domestic demand will also help boost demand for vehicles."

Premier Wen Jiabao last month announced a 4 trillion yuan stimulus package to sustain expansion amid a deepening global slowdown and a crash in the domestic property market.

The truckmaker has bought back shares at prices ranging from HK$4.11 to HK$4.98. The stock gained 4.3 percent to close at HK$5.12 in Hong Kong. The shares have climbed 31 percent since Nov. 20, the day before the buyback began.

Sinotruk's vehicle sales rose 16 percent in the first 10 months, outpacing an 11 percent increase for China's overall market, according to the China Association of Automobile Manufacturers.

The company has enough capital and it will continue to buyback shares if the pricing is attractive, according to Ni. The truckmaker raised HK$9 billion in an initial public offering last year to fund new plants and technology improvements.

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