YING LI: To get S$284 m from new strategic shareholder, China Everbright

L-R (from Ying Li): He Zhao Ju, non-executive director; Christopher Chong, lead independent director; Fang Ming, chairman & CEO;
(from China Everbright): James Pan, head of real estate investment; Desmond Chan, General Counsel & Company Secretary; Victor Ai, MD of real estate investment.

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Ying Li chairman & CEO Fang Ming (left) exchanges gifts with James Pan, head of real estate investment, China Everbright.Photos by Ngo Yit Sung

YING LI INTERNATIONAL has become the second Singapore-listed Chinese property play in the past year to become the target of investment by a Chinese state-owned enterprise.

Prior to this, China New Town Development welcomed CDB Capital as its new controlling shareholder with a 54.3% stake.

CDB Capital is the investment arm of China Development Bank, one of China's three policy lenders.

For its stake in China New Town, CDB Capital injected HK$1.4 billion (S$226 million) into the company. For background, see: CHINA NEW TOWN DEVELOPMENT: Key China Bank To Subscribe For 51% Stake

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Brandon Ng, CFA, senior research analyst at UOB Kay Hian (right), chats with Victor Ai, MD of real estate investment at China Everbright.And now it's Ying Li's turn.

China Everbright Limited (CEL), the asset management arm of financial conglomerate China Everbright Group, will invest S$284 million in Ying Li through the subscription of new shares and perpetual convertible securities.

Ying Li will issue 381 million new shares at S$0.260 apiece for gross proceeds of S$99.1 million.

In addition, it will receive S$185 million through the issue of perpetual convertible securities that can be converted into new ordinary shares of Ying Li.

CEL will become the second largest shareholder of Ying Li after the share subscription, ranking next to Mr Fang Ming, the Executive Chairman and CEO of the Group.

YL_guests

L-R: Zeng Li (Reporter, Chong Qing Daily), Li Jing Huan (Deputy GM, Business Development, of Ying Li International), Yang Peng (VP of Everbright Ashmore Investment), Vanessa Zhang (Manager of Ying Li), Yang Xiao Yu ( Executive Director & Deputy GM, Human Resources and Administration, of Ying Li)Ying Li will use the monies to accelerate development of existing projects and finance new projects.

Ying Li aims to leverage on CEL’s network and strong connections to secure projects in prime locations in the first- and leading second-tier cities in China, as well as seek expansion into Singapore and Hong Kong.

The proposed transaction is subject to shareholders' approval at an EGM.

The Powerpoint presentation materials can be viewed here.

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Officials from Ying Li and China Everbright, reporters and analysts were among the attendees at a briefing yesterday at The Ritz-Carlton, Singapore.

Excerpts from Voyage Research's report

Analyst: Liu Jinshu

YingLi_IFC.7.14 Ying Li International has built iconic real estate assets (such as the Yingli IFC, above) in Chongqing, which is the economic centre of Western China and the most populous city in China with 30 million people. Photo: CompanyOur View: The transactions incentivizes CEL to foster Ying Li’s growth over the next three to six years in order to maximize its profits from the conversion of the convertible securities into new shares at S$0.318 each.

On Ying Li’s side, refinancing risk is significantly reduced due to the perpetual nature of the securities. Previously, investors had been deterred by refinancing risk following the 2010 issue of convertible bonds that have since been redeemed and refinanced via bank loans in 2013.

While CEL may be acquiring 30.68% of Ying Li at a discount to RNAV, investors are likely to enjoy a net gain from the previous close of S$0.285 if the CEL and Ying Li collaboration results in a stronger pipeline of catalysts.

Financial Effects and Valuation: In this update, we refrain from adjusting our forecasts and valuation. In our view, the value-add of the transactions will be better reflected when Ying Li acquires new projects or brings forward the completion of existing projects using the funds raised.

Merely incorporating the cash component of the transactions and the new shares to be issued into our model will not reflect the steepening of Ying Li’s growth trajectory.

Ying Li has not acquired any major new land sites since the purchase of the Wei Yuan Road land plot to expand the Chongqing Financial Street project in Dec 2011.

Key developments since then have been focused on the completion of existing projects. There was some promise following the launch of Ying Li 3.0 in Jul 2013.

However, execution has been limited. As such the funds raised and framework agreement with CEL increases optimism over future land acquisitions.

We reiterate that the company’s current share price remains attractive at only 10.8x FY14 P/E and at a steep discount to RNAV.

Intrinsic value: S$0.845. Increase exposure.

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YING LI: To get S$284 m from new strategic shareholder, China Everbright

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