报告名称：Legend Holdings(03396.HK)Lakala transaction： profit guarantee above base case; N
报告类型：港股研究
报告日期：2016-02-11
研究机构：高盛集团
股票名称：联想控股
股票代码：03396
页数：8
简介：What's changed
Legend announced on Feb 5 that, together with other shareholders of LakalaLegend’s 31.38%-owned associate), it has entered into an agreement withTibet Tourism (TT, 600749.SS, Not Covered), under which TT will acquire100% of Lakala for Rmb11bn in exchange for the issuance of 456mn shares tocertain Lakala’s existing shareholders valued at Rmb8.5bn with the rest of theconsideration (Rmb2.5bn) to be paid in cash funded by issuing 295mn sharesat Rmb18.65/share, or a 21% discount to TT’s close price before its sharessuspended trading on Nov 27, 2015. Legend will receive 185.1mn TT sharesfor its 31.38% stake (valued at Rmb3,452mn according to the announcement)and subscribe to an additional 33.2mn shares for Rmb620mn, resulting in23.23% stake in TT and making it the second largest shareholder. Completionof the transaction is pending CSRC and PBOC approval. The new TT sharesare subject to a lock-up period of 12-36 months upon completion.
Implications
Lakala is a leading third-party payment service provider in China, engaging incard acceptance and personal payment business (72% of 2015 revenue). Itgenerated Rmb126mn net profit in 2015 (vs. net loss of Rmb196mn in 2014), aturnaround earlier than we expected, driven by 304% growth in GMV toRmb904bn and disciplined cost control. The agreement includes a guaranteeclause for Lakala to achieve at least Rmb450mn/860mn/1.45bn net profit in2016-18, implying 3-4% potential upside vs. our net profit estimates forLegend. The Rmb3,452mn Lakala valuation attributable to Legend, orHK$1.73/sh (implies 24.4x/12.8x P/E in 2016/17 based on the guarantee profitfigure), is relatively NAV neutral vs. HK$1.55/sh we use in our HK$28.40 12mNAV-based TP (4% of Legend’s 2016E NAV); see Ex. 3. We base our valuationon Rmb10.45bn post-investment valuation for 100% of Lakala implied by itsmost recent round of equity financing in 1H15 as per Legend’s IPO prospectus.
Valuation
We do not factor in the above transaction until completion. At 38% disc. to2016E NAV (vs. China conglo average of 43%), Legend looks fairly valued.
Key risks
Upside: Value-accretive M&As. Downside: Slower turnaround of Lenovo.
INVESTMENT LIST MEMBERSHIP
Neutral
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