报告名称：Franshion Properties(00817.HK)Fantastic Four
报告类型：港股研究
报告日期：2015-06-10
研究机构：摩根大通银行
股票名称：方兴地产
股票代码：00817
页数：10
简介：Franshion Properties (FRAN) announced the introduction of four strategicinvestors, namely New China Life Insurance (NCL, H-share: 1336 HK; Ashare:601336 CH), GIC, Warburg and Dr Walter Kwok. They all come fromdifferent fields a domestic insurer, a global PE fund, a Singaporeansovereign fund and a well-known industry expert. We expect the two biggestadvantages in near term are 1) a reduction of funding cost with the help of lowcostinsurance funds, and 2) potential partnerships in bidding land ordeveloping integrated complex projects. To be more specific, NLC isinterested in senior living and primary land development, while GIC andWarburg are more interested in fast-churn projects. Dr Kwok is keen oninvolvement in mixed-use projects and hotel development. We believe themultifaceted backgrounds of new investors will help Franshion strengthen itsbusiness. Reiterate Outperform.Impact
Potential impact. A total of 1,600m new shares will be issued at HK$2.73/sh(9.9% discount from the last trading date), or 14.99% of the enlarged sharecapital, at a value of HK$4.37b. Total net proceeds will be HK$4.35bn, which willbe used as general working capital and debt refinancing. Pro forma net gearingwill go down 22ppt from 103% to 81%, if treating the US$600m PCS as debt.2015F EPS to be diluted by 15% to HK$0.29.
SOE reform. Management commented that the introduction of strategicinvestors is an SOE reform move towards a mixed ownership structure. Theyexpect a better management incentive scheme and possible new appointmentsto the Board to follow suit in the near future. While the dilution to the existingshareholders looks large, these new investors all come from a strongbackground with different areas of expertise (Fig 2), which is a great fit toFRANˇs multiple business lines.
Shareholding change. Post transaction, SinoChemˇs stake will be dilutedfrom 63.50% to 53.98%, or down further to 46.77% if factoring in the PCSconversion. However, this will not change the support from SinoChem, whichwill still consolidate FRAN into its balance sheet. NCL will become the 2ndlargest shareholder with a 9.50% stake, followed by GIC (6.54%).Earnings and target price revision
No change.
Price catalyst
12-month price target: HK$4.07 based on a Sum of Parts methodology.
Catalyst: Accelerating new launches and sales, and Changsha land salesAction and recommendation
FRAN remains our sector top pick, and it has strong exposure in T1 and T2cities which account for ~90% of its property sales. The stock will resumetrading at 9am on 10 June, and is currently trading at a 33% discount to NAV,9.0x 2015E PE. Reiterate Outperform.

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