Fosun's Strategy of "Streamlining the Organization" Begins to Bear Fruit and Offshore Syndicated Loan are Launched
The offshore syndicated loan was jointly initiated by seven banks including Bank of China, Bank of East Asia, Commerzbank, Hang Seng Bank, HSBC, Natixis Bank, and Standard Chartered Bank as lead bookrunners.
In January this year, Fosun's domestic entity obtained a syndicated loan of RMB12 billion. At that time, Industrial and Commercial Bank of China, Agricultural Bank of China, Bank of China, China Construction Bank, and Bank of Communications acted as joint lead banks, and China Minsheng Bank, the Export-Import Bank of China, and Shanghai Pudong Development Bank acted as participating banks to form a syndicate to provide Fosun High Technology, the domestic operating entity of Fosun International a RMB loan.
Market analysts believe that although Fosun has been involved in Nanjing Iron & Steel transaction disputes and other incidents some time ago, domestic and foreign banks have successively provided large amounts of credit support to Fosun, which reflects that mainstream financial institutions' recognition of Fosun's commitments to accelerate the sale of non-core assets and cash inflows for debt management. The significant financial support from banks will help Fosun reduce its dependence on public market financing, and the optimized debt structure will support subsequent liquidity management and sustainable business development.
Last year, negative opinions about Fosun's rating downgrade put pressure on Fosun, which also brought a lot of speculation to the market at that time. Market sentiment was dampened significantly, and onshore and offshore bond prices also plummeted. However, at the same time, Fosun redeemed EUR380 million bond in October last year and US$450 million bond in January this year, and recently redeemed EUR350 million Euro bond, totaling US$1.25 billion in offshore bonds. Meanwhile, in the first quarter of 2023, Fosun High Technology successfully redeemed RMB5.93 billion bond in the domestic open market. The market's previous doubts about its liquidity are invalid, and the company's efforts are notable. It is worth looking forward to Fosun's next step to further enhance the recognition of the market and banks.
At the subsidiaries business level, in 2022, Fosun experienced profit shocks due to overseas interest rate hikes, geopolitical conflicts, and the frequent occurrence of the epidemic. Since the liberalization of epidemic prevention measures in 2023, its focused strategy on core businesses in the household consumption sector has been accelerated and yielded results. In the first quarter of this year, the business of all segments showed a strong upward trend. In the Happiness segment, Yuyuan achieved an operating revenue of RMB15.244 billion, representing a year-on-year growth of 22.61%. The recovery trend of the core consumer business was obvious. The revenue of Yuyuan Jewelry and Fashion reached RMB11.494 billion, representing a year-on-year increase of 28.55%. Benefiting from the overall relaxation of travel restrictions worldwide and the effective implementation of the company's strategy, Fosun Tourism Group's (FTG) profit attributable to the parent in the first quarter doubled compared with the same period in 2022, Club Med's business volume reached RMB5.004 billion, an increase of about 44.2%; during the May Day holiday this year, the total business volume of Club Med resorts in China exceeded the same period in 2022 by about eight folds, and exceeded the same period in 2019 by about 110%. In the Health segment, Fosun Pharma achieved an operating revenue of RMB10.871 billion in the first quarter, representing a year-on-year increase of 4.68%; net profit attributable to shareholders of the listed company after deducting extraordinary gain and loss was RMB919 million, representing a period-on-period increase of 14.78%; the revenue contribution of new and sub-new products further increased.
Previously, Goldman Sachs, Daiwa Capital Markets, Guotai Junan Securities, Soochow Securities and other domestic and foreign securities firms and investment banks successively published research reports, expressing optimism about Fosun's series of measures to reduce debt, optimize asset structure, and steadfastly focus on its core businesses. They believed that Fosun is well-positioned to achieve better performance in the future and assigned Fosun International a "Buy" or "Overweight" rating.
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