EUR 850.00 For Business Accounts Only

Morningstar | H-Share Placement Positive in Increasing Liquidity and Institutional Investors’ Involvement

China Vanke announced a share placement for its H-shares. Under the placement agreement, the company will issue 263 million new H-shares at HKD 29.68 per share. The placement price is at a discount of 5.02% to the latest closing price. The company will use the proceeds, totaling HKD 7.8 billion, to repay offshore debt financing. We believe the share placement increases liquidity for H-shares, as well as attracting more institutional investors, both are positives for the shares. We maintain our fair value estimate of HKD 38/CNY 30 and the company’s no-moat rating.

The new H-shares account for 16.67% of the company’s enlarged issued H-share capital and 2.33% of the total issued share capital. After the share placement, total H-shares will account for 14.0% of the total shares outstanding, up from 11.9%. Shenzhen Metro’s stake will be diluted from 29.38% to 28.69%. The share placement will also reduce the company pro forma 2018 year-end net gearing to 32.5%  from 36.3%. The proceeds will reduce current debt amount by 3.8% and interest expense by about CNY 0.5 billion.