No. of Recommendations: 3
On 1 February 2013, Shanghai Maple Guorun, an indirectly 99% owned subsidiary of the Company, entered into the Framework Agreement with Kandi Vehicles, an indirect wholly-owned subsidiary of Kandi Technologies, pursuant to which the parties agreed to establish the JV Company to engage in the investment, research and development, production, marketing and sales of electric vehicles in the PRC.

Pursuant to the terms of the Framework Agreement, the JV Company will be owned as to 50% by Shanghai Maple Guorun and as to 50% by Kandi Vehicles. The registered capital of the JV Company will be RMB1,000,000,000 and will be contributed by the parties as to 50% each. Upon the establishment of the JV Company, the JV Company will acquire certain assets from each of the Group and Kandi Group so that the JV Company will possess the necessary properties, assets and technologies to commence the electric vehicle business. To enable the proposed acquisitions to take place, both the Group and Kandi Group will establish new wholly-owned subsidiaries and inject certain assets into these companies. The JV Company will then acquire all the equity interests in each of these companies. The transfer of the equity interest in the newly established subsidiary of the Group to the JV Company will constitute a disposal of a subsidiary by the Group. As the principal terms of the Potential Disposal are yet to be finalized, the Company will make further announcement in relation to the Potential Disposal pursuant to the requirements of the Listing Rules as and when appropriate.


Geely is no flyweight! Kandi, on the other hand, is Lilliputian in a land of giants. They have been putting together a series of joint ventures which is probably their best option for quick growth. From an individual investor's point of view the danger is Kandi getting bought out, swallowed, by a larger entity thereby depriving us from the potential fast growth of the company and its stock. In various Asian Tigers there are convoluted corporate ownership groups, keiretsu in Japan, chaebol in South Korea, and I assume something similar in the PRC. As long as Kandi remains a listed stock we are OK but I would hate for Kandi to be bought out, even at a good price, before it develops its full potential.

Company Brief
Geely Automobile Holdings Limited (stock code: 175) is an automobile manufacturer, focusing on development, manufacturing and sales of passenger vehicles, The Company sells most of its products in the China market and has recently expanded its sales into other developing countries. The Company’s shares are listed on the Hong Kong Stock Exchange, and are majority- owned by its management team. With its Headquarters in Hangzhou and nine manufacturing plants in Linhai, Ningbo, Luqiao, Shanghai, Lanzhou, Xiangtan, Jinan Chengdu and Cixi, the Company has a total annual production capacity of 600,000 units of vehicles, engines and gearboxes. The Company sells its ten major models, which are powered by its own 1.0L-2.4L petro-engines and developed from its own product platforms, under three product brands: “GLEagle”, “Emgrand” and “Englon”  and through 1,000 retail stores in China. The Company also exported its products through 63 sales agents and 351 second tier shops in 52 oversea markets at the end of 2011, mainly in developing countries in Eastern Europe, Southern and Central America, Africa, Middle-East and Southeast Asia. Exports have become an increasingly important part of the Company’s business and accounted for 9% of the Company’s total sales volume of 421,611 units in 2011. With a total workforce of 17,288 staff at the end of 2011, the Company generated US$3.3 billion revenues and a net profit of US$244 million in 2011. Total market capitalization was US$2.8 billion on 10 May 2012.

Denny Schlesinger
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