Daiwa Reiterates its “Buy” Rating on Fosun with Full Support, and Sees an Attractive Entry Point in Fosun

Release Time：2022-06-28Author：Source: Pageviews：

(28 June 2022) Daiwa Capital Markets ("Daiwa") published a research report yesterday. It believes that the recent bond price fluctuations of Fosun International Limited (HKEX stock code: 00656, "Fosun International") were due to market overreaction. Daiwa also pointed out that Fosun's stable leverage and diversified funding channels should help it maintain stable liquidity. Therefore, Daiwa believes that Fosun is currently trading at an attractive entry price and reiterated its "Buy" rating and set the target price at HKD11.50. In addition, Goldman Sachs published a research report on 25 June. The firm also believes that the bond price fluctuations of Fosun International were caused by weak market sentiment including recession concerns for the US and European economies. The firm also quoted a recent report form S&P Global Ratings' that Fosun has adequate resources to meet its debt maturities in the short-term, and Fosun's recent tender offer could help it restore stability in its bond prices.

Daiwa cited that Fosun's recent tender offer to accept Any-and-All for full outstanding principal amount of its only two offshore bonds maturing this year will help boost investor confidence, and its healthy cash position, diversified funding channels and large investment portfolio should help it defend against external risks. Fosun is currently trading at a near-historical trough and it is now an attractive entry point to buy Fosun International's stock.

Daiwa pointed out that Fosun International is in a sound and healthy financial position according to Fosun International's 2021 annual report. As of the end of 2021, the total debt to total capital ratio dropped to 53.8%; the average cost of debt was at a historically low of 4.6%; cash, bank balances and term deposits reached RMB96.78 billion. In terms of cash and debt management, Fosun has always adhered to the principle of proactive management of maturing debts and continuous optimization of debt structure, and has built financing capabilities with diversified financing channels and wide recognition from the market. The Group and its subsidiaries have established partnerships with more than 100 Chinese and foreign banks around the world and have signed strategic cooperation agreements with many international banks and Chinese banks. Facing the volatility of the public market, Fosun made full use of its diversified financing channels to maintain stable liquidity. In addition, Fosun's global investment portfolio and the return of funds from its recent investment exits demonstrate Fosun's long-standing financial strategy and its emphasis on profound industry operations and a balanced investment-divestment strategy to further strengthen its cash flow.

Goldman Sachs' research report has also quoted S&P Global Ratings' report on 23 June. S&P Global Ratings commented that Fosun has adequate resources to meet its upcoming debt maturities over the next six to 12 months and Fosun can rely on asset monetization and stable banking relationships to manage its liquidity. According to S&P Global Ratings, it believes Fosun's considerable global asset scale, diversified investment portfolio, and ability to strike a balance between investments and divestments, could offer Fosun's flexibility to recycle assets and replenish cash. Goldman Sachs' pointed out that the recent share price fluctuations of Fosun International were mainly caused by market overreaction, and elevated recession concerns for the US and European economies yet Fosun's recent tender offer to its two offshore bonds maturing this year could help it restore stability in its bond prices.

Fosun has been steadfastly fulfilling its mission of "creating happier lives for families worldwide", strengthening its presence in four business segments: Health, Happiness, Wealth and Intelligent Manufacturing. It is also one of the few companies in China which has global operations and investment capabilities and has built up solid technology and innovation capabilities. In the face of the volatile epidemic situation and many external uncertainties, Fosun maintained a stable leverage ratio, high risk tolerance with its multi-currency debts and stable debt maturity, maintaining a healthy financial position. In the future, Fosun will protect itself against market risk with a diversified business portfolio, a global asset presence, and the "Profound Industry Operations + Industrial Investment" strategy, and will continue to adhere to strict financial and capital management systems, further consolidate the Company's capital foundation, and grasp opportunities amid global market fluctuations and changes, thereby making solid yet bold progress for its growth and development.

Founded in 1992, Fosun is a global innovation-driven consumer group dedicated to providing high-quality products and services for families around the world in Health, Happiness, Wealth, and Intelligent Manufacturing segments. In 2007, Fosun International Limited was listed on the main board of the Hong Kong Stock Exchange (stock code: 00656.HK). In 2021, Fosun International's total revenue was RMB161.3 billion and total assets amounted to RMB806.4 billion. Fosun International ranks No.589 on the 2022 Forbes Global 2000 List, with a MSCI ESG rating of AA.