Prosperity ahead
PROSPERITY Minerals Holdings is listed on Aim. It was originally involved in the manufacture and sale of cement in China and the trading of iron ore. However, in December, the company said it had conditionally sold five of its six cement businesses and three cement development projects for about 300 million to TCC International.
Prosperity was facing a hefty capital investment programme to maintain its market position and decided, instead, to focus on its iron ore trading operations, although it has retained a one-third stake in one cement operation, ACC. By so doing it retains its position at an "A" share on the Shanghai Stock Exchange, the classification of equity traditionally hard for foreign companies to own.
Advertisement
Hide AdAdvertisement
Hide AdProsperity must now decide what to do with these proceeds. There is the possibility of the return of at least some of the cash in a special dividend but chief financial officer Patrick Li has suggested the most likely course of action would be to expand the iron ore business and buy property, both linked to China's urbanisation and rising demand for steel and cement.
Prosperity was recently the subject of a favourable article in Shares magazine and the subject of a "Buy" recommendation from the house broker, Daniel Stewart & Company. Even so, there is a risk Prosperity might squander its cash haul through ill-advised property purchases.
In addition, the rise in the iron ore price might, if it continues, affect demand, although the company does not see this as an issue. There are always risks buying into a company whose principal operations are in China. Nevertheless, Prosperity does look an interesting prospect to a commitment into China's booming economic growth.
The value of your investment could fall and you may get back less than you invested. You should take professional advice if you have any doubt about the suitability of this company for your portfolio.