China Tower announced earlier that shareholders passed a bill proposing share consolidation and share capital reduction. It is expected to take effect on February 20. UBS published a report stating that potential share consolidation and adjustments in the number of shares per lot should create a more friendly trading environment for institutional investors. After consolidation, fluctuations should be less drastic, and the amount per lot will be 2.5 times the previous one, which may create a more friendly trading environment for institutional investors. The bank rated the company “neutral” and the target price was HK$1.15.
In addition, the bank also stated that China Tower must allocate 10% of its annual net profit to legal reserves, and this requirement will continue until the reserve balance reaches 50% of the registered capital. As the registered capital is reduced to one-tenth of what it used to be, lower statutory reserve requirements will release more distributable profits and provide more room for long-term dividend payments.
