Prosperity Minerals sees more domestic demand coming from China's new 5 year plan


Updated Tue, 30 Nov 2010 00:00:00 GMT

Prosperity Minerals (LON:PMHL) believes that China's new five year economic plan will lead to expanding domestic demand.

The company has a broad range of assets including an iron ore trading business, real estate development and a number of cement related interests.

It has been sitting on a substantial cash pile since it sold most of its cement business for around US$490 million – the final payment was received in August. Prosperity plans to invest in the Chinese iron ore and property assets to benefit from the countries ever expanding market place.

"The PRC continues to be the world's fastest growing major economy and in its new five year plan 2011-15, there will be a palpable shift of focus from exports to the expansion of domestic demand and the welfare of China's more than 1.3 billion inhabitants," chairman David Wong said.

"We believe this can only be good news for Prosperity's prime businesses."

This afternoon Prosperity released its interim results for the six months ended 30 September 2010. The headline results were enhanced by the massive gains made following the cement divestments.

As a result of the US$489 million disposal the company had a US$237 million gain, which boosted the rest of the figures.  The company made a net profit of US$234.5 million, around 10 times more than the comparative period of 2009. Earnings (EBITDA) reached US$237.9 million (H109: US$42.9 million).

"It has been another very busy and profitable six months for the group," Wong added.

“We completed the sale of the majority of cement assets for some US$490 million, including debt, entered into an agreement to buy iron ore from Malaysia and diversified into the real estate sector with purchases in Guangzhou and the establishment of a new joint venture in Changzhou City,

"Similarly, in the second half, we are looking at a number of equally exciting projects in both iron ore and property."

In respect of current trading, Prosperity said that iron ore trading volumes have been recovering from the lower volumes that were shipped in the first half.

Furthermore it expects more iron ore shipments from its partner Grace Wise in the second half.

It is also considering a new property investment in two high-end residential property developments.

The projects are located in Chongqing Direct Municipal City, in south-western China and in Hangzhou City in the Zhejiang Province of eastern China.

"Management remains positive about the medium to long term prospects of the PRC real estate market and believes that the PRC government's measures aimed at cooling speculation will benefit the market over the same period," the company said.