News Alert: Stronger-than-expected tone from major shareholder and Shenzhen SASAC officials
- SZ Metro’s Chairman and SZ SASAC’s Chairman affirmed the importance of Vanke to SZ SASAC during a conference call held on Monday (6 Nov) and pledged to offer support to the company under extreme situations
- The tone expressed in the call came in stronger-than-expected and should offer temporary comfort to the capital market
- Expect a near-term share price rebound, though sustainability of the rally hinges on materialization of the follow-up actions from SZ Metro and/or SZ SASAC, as well as the company’s presales performance
- We currently have BUY rating with TP of HK$12.6/shr
Stronger-than-expected tone from SZ SASAC should help stabilize investor sentiment. Vanke held a conference call on 6th Nov (Mon) with >150 onshore and offshore financial institutions, aiming to clear out numerous market rumours surrounded the company over the past month that have triggered market concerns on Vanke’s liquidity outlook and thus a round of sell-off on both its on/offshore bonds and share prices. Chairman Xin of Shenzhen Metro (Vanke’s major shareholder) and Chairman Zhang of Shenzhen SASAC (State-Owned Assets Supervision and Administration Commission, owns 100% of Shenzhen Metro) were both present in the conference call, reaffirming Vanke’s value to Shenzhen SASAC and dismissed rumours relating their intention to sell-down stake on the developer. They have also stressed their willingness to support the company under extreme adverse situations through market-oriented and legally feasible ways. Specific supportive measures mentioned includes: 1) project cooperation (undertake all or partial stakes of Vanke’s Shenzhen redevelopment projects that is valued at >Rmb10bn); 2) subscription of bonds; 3) coordination with financial institutions to intensify financing support; 4) optimize Vanke’s long-term equity structure. We believe the supportive tone expressed during the call was stronger-than-expected and this should help cushion recently fragile investor sentiments.
Expect near-term share price rebound, but sustainability requires concrete action. Investor sentiment has taken a hit recently led by further dampened investor sentiments upon the unexpected step down of Gemdale’s Chairman and circulated rumours relating Shenzhen Metro’s seeking of disposal of its stake in Vanke. The voice of support from SZ Metro and SZ SASAC should be supportive to Vanke’s near-term share price performance and may benefit other non-SOE surviving names such as Longfor (960 HK) and Gemdale (600383 CH). However, sustainability of such share price pickup will hinge on follow-up actions of SZMC and SZ SASAC. The company’s presales performance will also continue to be a key factor that investors will keep a close eye onto. We currently have a BUY rating with TP of HK$12.60/shr on the counter.
Key conference call takeaway