Qiangsheng to get the top spot

By Wang Ying (China Daily)
Updated: 2010-08-03 15:05
Large Medium Small

Restructuring to give firm lead in Shanghai's taxi, car rental businesses

Qiangsheng to get the top spot
Qiangsheng Holding Co Ltd taxis are lined up at a parking lot in Shanghai. Jin Wen / For China Daily 

SHANGHAI - The restructuring plan announced on Monday involving Shanghai Qiangsheng Group and Shanghai Jiushi Corporation will help Shanghai-listed Qiangsheng Holding Co Ltd become the market leader in Shanghai's taxi and car rental businesses, said analysts.

Qiangsheng Holding said in an announcement to the Shanghai Stock Exchange that it plans to raise funds to buy assets from its two largest shareholders - Shanghai Qiangsheng Group and Shanghai Jiushi Corporation. The Shanghai-listed company said it plans to sell about 245 million shares in a private placement at 7.03 yuan ($1.04) per share, making the new issuance of shares worth 1.72 billion yuan.

In return, the two largest shareholders will inject their taxi operations, car rental, auto service and travel businesses into Qiangsheng Holding.

Shares of the company soared to the daily limit of 10 percent on Monday, ending at 7.69 yuan per share.

After the asset restructuring, Qiangsheng Holding will become a market leader in Shanghai's taxi and car rental business, said Jiang Jie, an analyst from Changjiang Securities. "Once the restructuring of Shanghai Jiushi Corporation and Shanghai Qiangsheng Group takes place, Qiangsheng Holding will possess more than 12,000 taxis and a 25 percent market share. This will help it overtake Shanghai Dazhong Taxi Co Ltd to become the city's largest taxi operator."

Qiangsheng Holding currently operates more than 6,000 taxis across Shanghai, only second to Dazhong, which owns nearly 9,000 taxis.

The smaller Shanghai Bashi Taxi Co Ltd, a subsidiary under Shanghai Jiushi Corporation, operates nearly 6,000 taxis. "The average taxi will contribute around 15,000 yuan in profit annually; therefore, the taxi business after restructuring will secure Qiangsheng Holding an annual net profit of 180 million yuan," said Jiang.

Sun Donglin, board chairman of Qiangsheng Holding, said the restructuring will further improve the company's profitability and competitiveness.

The Shanghai Municipal State-owned Assets Supervision and Administration Commission, the body overseeing 46 local State-owned companies, is planning a thorough shake-up of the companies, said Liang Jinxiong, a strategic analyst with Dongguan Securities.

"During this large-scale restructuring, less-competitive and labor-intensive companies will either be acquired or shut down, and Shanghai municipal government will cut the number of State-owned companies in the city from 79 to 54 within three years," said Liang.

China Daily