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COSCO SHIPPING Development Co., Ltd. — Capital/Financing Update 2020
Oct 12, 2020
50782_rns_2020-10-12_551642da-91e3-4bcf-b6fb-cc7abf7bd007.pdf
Capital/Financing Update
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Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement.
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中遠海運發展股份有限公司 COSCO SHIPPING Development Co., Ltd.*
(A joint stock limited company incorporated in the People’s Republic of China with limited liability)
(Stock Code: 02866)
OVERSEAS REGULATORY ANNOUNCEMENT
This announcement is made pursuant to Rule 13.10B of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited.
The “Valuation Report of China International Capital Corporation in respect of the Material Asset Disposal of COSCO SHIPPING Development Co., Ltd.” as published by COSCO SHIPPING Development Co., Ltd. in Chinese on the website of the Shanghai Stock Exchange (www.sse.com. cn) on 12 October 2020 is enclosed hereto as overseas regulatory announcement in Chinese and English for your reference only. In case of any inconsistencies between the Chinese version and the English translation, the Chinese version shall prevail.
By order of the Board COSCO SHIPPING Development Co., Ltd. Cai Lei Joint Company Secretary
12 October 2020
As at the date of this announcement, the Board comprises Mr. Wang Daxiong, Mr. Liu Chong and Mr. Xu Hui, being executive Directors, Mr. Feng Boming, Mr. Huang Jian and Mr. Liang Yanfeng, being non-executive Directors, and Mr. Cai Hongping, Ms. Hai Chi Yuet, Mr. Graeme Jack, Mr. Lu Jianzhong and Ms. Zhang Weihua, being independent non-executive Directors.
- The Company is a registered non-Hong Kong company as defined under the Companies Ordinance (Chapter 622 of the Laws of Hong Kong) and it is registered under its Chinese name and under the English name “COSCO SHIPPING Development Co., Ltd.”.
China International Capital Corporation Limited
Valuation Report
in Respect of the Material Asset Disposal of
COSCO SHIPPING Development Co., Ltd.
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October 2020
Statement
I. The analysis in this report has been made in respect of China International Marine Containers (Group) Co., Ltd. (“CIMC” or the “Target Company”) and relevant information is from publicly available sources.
II. This report has been prepared by China International Capital Corporation Limited (“CICC”) in accordance with applicable laws and regulations and regulatory documents in relation to material asset restructuring of listed companies, including Measures for the Administration of the Material Asset Restructuring of Listed Companies (2020 Revision) and Rule No. 26 on Contents and Format of Information Disclosure by Companies Publicly Issuing Securities – Material Asset Restructuring of Listed Companies (2018 Revision) for use by the board of directors of the Listed Company. The report does not constitute any advice, recommendation or compensation towards any third party.
III. The analysis, judgements and conclusions contained in this report are subject to the assumptions and restrictions herein. Users of this report are advised to duly consider the assumptions and restrictions in this report and their effects on the conclusions.
IV. Although this report has been prepared based on and relying on the accuracy and completeness of the publicly available information contained herein, the use of such information by CICC does not indicate that CICC has independently verified such information or concurs with it. This report does not constitute any assurance as to the accuracy, completeness or appropriateness of such information.
V. In this report, no comprehensive analysis has been conducted on the business, operations or financial conditions of the parties, nor has any opinion, prediction or assurance been given in respect of any strategic or business decisions or development prospects of the parties, nor has any opinion been expressed on any other matters. This report is based on the financial conditions, economic environment, market conditions and other circumstances as at the dates indicated in the report and is therefore subject to change from time to time. CICC takes no responsibility for any risk or loss that investors may incur due to any investment decisions (including but not limited to purchase, sale and holding) made based on this report.
VI. In preparing this report, the investment objective, financial condition, taxation status, risk appetite or individual condition of any particular investor has not been taken into
consideration. As different investors have different investment objectives and portfolios, investors are advised to consult their respective brokers, lawyers, accountants, tax consultants or other professional advisers if they need any specific advice.
VII. The opinions contained in this valuation report are only based on analysis on published financial information without taking into account business, legal, taxation circumstances, and regulatory environment and other factors. This report also does not express opinions on the trading value or stock price performance of the Target Company after the completion or failure of the disposal. Such factors are beyond the scope of consideration and scope of engagement of this report.
VIII. The analysis on comparable companies in this report has not covered all potential comparable companies. Also, there is no comparable company in the market which is exactly the same as the Target Company in the following aspects: geographical market, business mix, business scale, risk profile, asset size, valuation methodology, accounting policies, historical performance, future outlook, market presence, political risk, regulatory environment and others. Investors should note that the analysis on comparable companies can only be used as an indicative analysis in respect of the potential value of the Target Company as at 25 August 2020.
IX. CICC has not engaged or authorized any institution or individual to provide any information not contained in this report or to make any explanation or description in respect of this report. Without prior written consent of CICC, no party is allowed to reproduce, distribute or refer to this report or any part of it at any time, for any purpose and in any form. For any inconsistency that may exist in this report, it is solely CICC that has the right of interpretation.
X. This report can only be used for the purpose of the disposal of the 17.94% equity interest in CIMC indirectly held by COSCO SHIPPING Development Co., Ltd. (“COSCO SHIPPING Development”, the “Listed Company” or the “Company”) through Long Honour Investments Limited (“Long Honour”), one of its subsidiaries, and COSCO Container Industries Limited (“COSCO Industries”) (the “Transaction”) and may not be used for any other purposes. The conclusions in this report should be considered in conjunction with this report and general contents of other disclosure documents in relation to the Transaction. CICC advises investors to carefully read the announcements published in relation to disclosure of the Transaction and review relevant documents.
XI. Unless otherwise defined in this report, the abbreviated terms used in this report shall have the same meanings as those defined in the Report on Material Asset Disposal of COSCO SHIPPING Development Co., Ltd. (Draft).
XII. The discrepancies between the totals and sums of amounts listed (if any) are due to rounding adjustments. Unless otherwise stated, all financial data and financial indicators used in this report are consolidated financial data and financial indicators calculated based on such financial data.
CONTENTS
Chapter I Introduction of Background ............................................................................................... 6 I. Information of the Parties of the Transaction and the Target Company ..................................... 6 II. The Transaction Proposal ........................................................................................................... 7 III. Background and Purpose of the Transaction ............................................................................ 8 (I) Background of the Transaction .......................................................................................... 8 (II) Purposes of the Transaction .............................................................................................. 9 IV. Valuation Purpose ..................................................................................................................... 9 V. Benchmark Date......................................................................................................................... 9 Chapter II Valuation Approach and Method ................................................................................... 10 I. Comparison of Valuation Approach and Methods .................................................................. 10 II. Comparable Company Method ................................................................................................ 12 (I) Selection of comparable companies ................................................................................. 12 (II) Selection of valuation indicators ..................................................................................... 16 (III) Analysis on valuation of comparable companies .......................................................... 17 III. Comparison with the Historical Transaction Prices ................................................................ 18 Chapter III Valuation Assumptions .................................................................................................. 21 I. General Assumptions ................................................................................................................. 21 (I) Open market assumption .................................................................................................. 21 (II) Going concern assumption .............................................................................................. 21 II. Special Assumptions ................................................................................................................ 21 Chapter IV Report Conclusions ........................................................................................................ 23 I. Report Conclusions ................................................................................................................. 23 II. Report Use Restrictions ................................................................................................................... 23
Chapter I Introduction of Background
I. Information of the Parties of the Transaction and the Target Company
(I) Information of the Listed Company
COSCO SHIPPING Development, formerly known as China Shipping Container Lines Company Limited, was established in 1997 with its headquarters located in Shanghai and its Unified Social Credit Code being 91310000759579978L. COSCO SHIPPING Development aims to develop an industrial cluster with shipping leasing, container manufacturing, investment and services for the related industries as the core and to develop into a “one-stop” shipping financial service platform by combining industry with finance, promoting the development of industry with finance and realizing synergy of various operations.
Immediately prior to the Transaction, COSCO SHIPPING Development indirectly holds a total of 813,616,829 shares of CIMC through Long Honour and COSCO Industries, representing approximately 22.63% of the total share capital of CIMC.
(II) Information of the Counterparty of the Transaction
The counterparty of the Transaction is Shenzhen Capital Holdings Co., Ltd. (hereinafter referred to as “Shenzhen Capital Holdings”) together with its subsidiary, Shenzhen Capital (Hong Kong) Container Investment Company Limited (hereinafter referred to as “Shenzhen Capital Hong Kong”). Shenzhen Capital Holdings was established in 2007 with its headquarters located in Shenzhen and its Unified Social Credit Code being 91440300664187170P. It is wholly owned by the State-owned Assets Supervision and Administration Commission of Shenzhen and is also an important platform for the operation of state-owned capital of Shenzhen. Shenzhen Capital Hong Kong was established on 22 September 2020 with the registration number of 2979432 and it will principally be engaged in equity investment.
(III) Information of the Target Company
CIMC was established in 1980 with its headquarters located in Shenzhen and its Unified Social Credit Code being 91440300618869509J. CIMC is currently principally engaged in, among
others, manufacturing of containers, road transportation vehicles, energy, chemicals, liquid food equipment, offshore engineering equipment and airport, fire safety and automated logistics equipment and providing relevant services.
For details of the business, financial and other conditions of the parties of the Transaction and the Target Company, please refer to the Report on Material Asset Disposal of COSCO SHIPPING Development Co., Ltd. (Draft) in relation to this material asset disposal.
II. The Transaction Proposal
(I) Summary of the Transaction Proposal
COSCO Industries, an indirect wholly-owned subsidiary of the Listed Company, proposed to sell 350,000,000 A shares and 264,624,090 H shares of CIMC it held to Shenzhen Capital Holdings and Shenzhen Capital Hong Kong by way of transfer agreement. Meanwhile, Long Honour, an indirect wholly-owned subsidiary of the Listed Company proposed to sell 30,386,527 H shares of CIMC it held to Shenzhen Capital Hong Kong by way of agreement.
(II) Pricing Basis and Transaction Price
According to the Share Transfer Agreement entered into by COSCO SHIPPING Development with Shenzhen Capital Holdings and Shenzhen Capital Hong Kong, the price per target A share for transfer shall not be lower than the higher of the following:
-
the arithmetic average of the daily weighted average prices of the A shares for the 30 trading days prior to the date of the indicative announcement in relation to the Transaction issued by CIMC, being RMB8.48 per share;
-
the audited net asset value per share of CIMC for the most latest financial year, being
RMB9.83 per share.
The price per target H share for transfer shall not be lower than the higher of the following:
-
the arithmetic average of the daily weighted average price of the H shares for the 30 trading days prior to the date of the indicative announcement in relation to the Transaction issued by CIMC, being HK$7.64 per share;
-
the audited net asset value per share of CIMC for the most latest financial year, being RMB9.83 per share.
Upon being agreed by the parties thereto through consultation, the price per target A share in the Transaction shall be RMB9.83 per share and the price per target H share in the Transaction shall be RMB9.83 per share.
(III) Payment Method
The Transaction shall be settled in cash, where the consideration for the transfer of target A shares shall be payable in RMB and the consideration for the transfer of target H shares shall be payable in Hong Kong dollars.
III. Background and Purpose of the Transaction
(I) Background of the Transaction
The Listed Company is principally engaged in shipping and industry-related leasing businesses, manufacturing of containers and provision of investment and related services. Immediately prior to the Transaction, the Listed Company indirectly holds a total of 813,616,829 A shares and H shares of CIMC through its indirect wholly-owned subsidiaries, namely Long Honour and COSCO Industries, representing 22.63% of the total share capital of CIMC.
In order to revitalize stock assets and optimize the asset structure, the Listed Company proposed to sell 30,386,527 H shares of CIMC held through Long Honour and 350,000,000 A shares and 264,624,090 H shares of CIMC held through COSCO Industries by way of transfer agreement.
(II) Purposes of the Transaction
It has taken into account the development plans, financial conditions, asset structure and other factors of the company in the disposal of the shares of CIMC by the Listed Company. The Listed Company can further optimize the business structure and focus on its own principal businesses through the Transaction and continue to develop the industry groups with shipping and industryrelated leasing businesses, manufacturing of containers and investment and related services as the core. In addition, the Transaction will enable the Listed Company to obtain cash equivalent to the consideration of the Transaction, which is beneficial to revitalizing stock assets, optimizing the asset structure and enhancing the sustainable profitability of the company.
IV. Valuation Purpose
On 18 August 2020, the Listed Company released the Indicative Announcement of COSCO SHIPPING Development Co., Ltd. on the Disposal of Assets, disclosing that the company is planning the disposal of equity interests in China International Marine Containers (Group) Co., Ltd. (Stock Codes: 000039.SZ and 2039.HK).
On 25 August 2020, the Listed Company released the Announcement on Entering into the Letter of Intent on Share Transfer and Progress of Disposal of Assets and the Target Company released the Indicative Announcement on the Proposed Transfer of Shares in the Company Held by Shareholders under Agreement and Trading Resumption, disclosing that COSCO Industries and Long Honour (being indirect wholly-owned subsidiaries of the Company) and other related parties entered into the Letter of Intent on the Transfer of Shares in China International Marine Containers (Group) Co., Ltd. with Shenzhen Capital Holdings.
On 12 October 2020, COSCO SHIPPING Development convened the 23rd meeting of the 6th session of the board of directors, at which it considered and approved the proposal on the disposal of 350,000,000 A shares and 295,010,617 H shares of CIMC held by its indirect whollyowned subsidiaries, namely COSCO Industries and Long Honour, through transfer under agreement and relevant resolutions on the material asset disposal.
The purpose of the valuation is to provide value reference for the above economic behaviors. This report does not constitute any advice, recommendation or compensation towards any third party.
V. Benchmark Date
The date of the indicative announcement released by the Target Company on the Transaction is 25 August 2020. The benchmark date of the valuation report is 25 August 2020.
Chapter II Valuation Approach and Method
I. Comparison of Valuation Approach and Methods
From a practical perspective of analysing M&A transactions, whether the transaction price is fair and reasonable can generally be assessed through the comparable company method, comparable transaction method and discounted cash flow method, etc.
The comparable company method would take the valuation multiples of the comparable listed companies as a reference based on the characteristics of the underlying companies. The core rationale is to utilise relevant financial indicators and valuation multiples in the secondary market to analyse the pricing of the Transaction.
With the comparable transaction method, companies in the same industry with the Target Company that have been invested, merged or acquired in a proper timeframe prior to the valuation will be chosen to analyse the pricing of the Transaction based on the pricing reference of the precedent financing or M&A transactions.
The basic steps of the discounted cash flow method are as follows: firstly, establish and use a financial model to forecast financial data including future net profit and cash flows; then, select a reasonable discount rate (i.e. weighted average cost of capital, WACC) in line with the characteristics of the underlying companies to discount the free cash flows and estimate the present value of expected future earnings, thus calculate the company’s valuation based on the expected earnings.
The advantages, disadvantages, and applicability of the above three methods are as follows:
The advantage of the comparable company method is that it is based on the effective market assumption, i.e. the transaction price reflects all available information — industrial trend, business risk, development speed and profitability etc., and relevant parameters could easily be obtained. The disadvantage is that it is difficult to make accurate adjustments for the business and financial differences across comparable companies, or to take into account factors such as mergers and acquisitions and supervision in the industry.
The advantage of the comparable transaction method is that the valuation is relatively determined since the method is based on actual price of completed transactions of comparable companies. The disadvantage is that there are no two identical transactions in the market in terms of risks relating to and potential of target companies due to the following: 1. the business scales, characteristics and portfolios of target companies are different; 2. the proportions of shareholding involved in the transaction are different; 3. the development processes of the target companies are different; 4. the expectations on target companies' future development are different. Therefore, there are high uncertainties in how to adjust the historical transaction prices to calculate the present value of the underlying companies.
The advantages of the discounted cash flow method include (1) it is theoretically the most comprehensive valuation method that takes into account the company’s operations from an overall perspective; (2) it is less susceptible to short-term volatility of the market and other non-economic factors; (3) it can integrate the strategies and synergies of the businesses after transaction into the valuation approach; and (4) it can deal with most of the complicated cases. Its disadvantages include (1) there are relatively more variables and assumptions in the financial model; (2) since the valuation is mainly based on and relatively sensitive to future assumptions, the accuracy of the forecast will possibly be affected due to high competitiveness and great volatility of the industry; and (3) it is difficult to obtain adequate reference for certain determinations of parameters.
Taking into account of the actual circumstances of the Transaction, this report will choose the appropriate method from the said three methods to examine and analyse whether the pricing of the Transaction is fair and reasonable.
Since the number of comparable transactions and the pricing data available in such transactions are relatively limited, which cannot reflect the overall valuation of CIMC's various business segments, the comparable transaction method is not applied for analysis in this valuation report. In addition, since COSCO SHIPPING Development does not have control over the Target Company and CIMC did not provide more detailed financial information on the one hand, and the disposal will not involve profit forecasts and lacks relevant reliable financial forecast data on the other hand, the discounted cash flow method cannot be applied for valuation analysis on the Transaction. Based on the above, the comparable company method is applied for valuation in this valuation report.
In addition, the subject of the Transaction is the listed shares, and historical transaction prices of which have been formed in the secondary market. This valuation report will also analyse whether the pricing of the Transaction is fair and reasonable with reference to the historical transaction prices of the Target Company’s shares.
II. Comparable Company Method
(I) Selection of comparable companies
The target asset under the Transaction is 17.94% equity interest in CIMC, which is an A- share and H-share listed company. In terms of its principal businesses, the road transportation vehicles, the manufacturing of containers and energy, chemical, liquid food equipment businesses contributed 27.19%, 23.50% and 17.57% of the business revenue of CIMC in 2019. Other businesses of CIMC accounted for relatively small proportions of the business revenue of CIMC. As a result, it mainly selected the corresponding comparable companies of the above three businesses in the valuation report when selecting comparable companies.
Based on the listing place and the principal business composition of CIMC, 11 comparable companies are selected for the valuation report with the details as follows:
| Short company name |
Stock code | Business revenue in 2019 (RMB100 million) |
Net profit attributable to the parent company in 2019 (RMB100 million) |
Net asset attributable to the parent company as at the end of 2019 (RMB100 million) |
Business overview |
Corresponding business segment of CIMC |
|---|---|---|---|---|---|---|
| Sinotruk (Hong Kong) |
3808.HK | 623.80 | 33.34 | 272.61 | Sinotruk (Hong Kong) is one of the leading heavy duty truck manufacturers in the PRC which specialises in the research, development and manufacture of heavy duty trucks, light duty trucks and buses and related key parts and components. |
Road transportation vehicles |
| Sinotruk | 000951.SZ | 398.43 | 12.23 | 69.89 | Sinotruk (A-share subject) is principally engaged in the manufacturing and sale of heavy duty trucks, specialty vehicles, specialty heavy duty truck chassis, bus chassis and automotive spare parts; the production and sale of automotive axle, transmission and spare parts, etc. |
Road transportation vehicles |
| FAW Jiefang | 000800.SZ | 276.64 | 0.53 | 80.48 | FAW Jiefang is principally engaged in the development, manufacturing and sale of passenger vehicles, trucks and their components and is one of the leading truck manufacturers in the PRC. |
Road transportation vehicles |
| Short company name |
Stock code | Business revenue in 2019 (RMB100 million) |
Net profit attributable to the parent company in 2019 (RMB100 million) |
Net asset attributable to the parent company as at the end of 2019 (RMB100 million) |
Business overview |
Corresponding business segment of CIMC |
|---|---|---|---|---|---|---|
| Wabash National |
WNC.N | 160.25 | 6.19 | 36.28 | Wabash National is principally engaged in the design, manufacturing and sale of trucks, tank trailers and transportation equipment. |
Road transportation vehicles |
| Hualing Xingma |
600375.SH | 63.83 | 0.43 | 28.54 | Hualing Xingma is principally engaged in the production and sale of heavy duty truck chassis and complete vehicles, engines, specialty heavy duty trucks, buses, automotive components and other products. |
Road transportation vehicles |
| COSCO SHIPPING Development |
601866.SH, 2866.HK |
142.29 | 17.43 | 242.08 | COSCO SHIPPING Development is an integrated financial service platform focusing on leasing business such as leasing of vessels, containers and non-shipping leasing with a focus on shipping finance. Meanwhile, it is also one of major container manufacturing companies in the world. |
Manufacturing of containers |
| Short company name |
Stock code | Business revenue in 2019 (RMB100 million) |
Net profit attributable to the parent company in 2019 (RMB100 million) |
Net asset attributable to the parent company as at the end of 2019 (RMB100 million) |
Business overview |
Corresponding business segment of CIMC |
|---|---|---|---|---|---|---|
| Trinity Industrial |
TRN.N | 207.64 | 9.51 | 141.36 | Trinity Industrial is principally engaged in the production and sale of tank and freight railcars, land feeding funnels, oil groove barges, highway barriers, security products etc. |
Energy, chemical, liquid food equipment |
| Chart Industries |
GTLS.O | 89.76 | 3.21 | 85.48 | Chart Industries is principally engaged in the production of industrial gas equipment, energy equipment and biomedical equipment. |
Energy, chemical, liquid food equipment |
| Furui Special Equipment |
300228.SZ | 15.74 | -3.27 | 14.15 | Furui Special Equipment is a leading provider of LNG gas supply system for vehicles and vessels in the PRC and is principally engaged in the design, production and sale of metal pressure containers. |
Energy, chemical, liquid food equipment |
| Square Technology |
603339.SH | 11.75 | 1.29 | 17.45 | Square Technology is principally engaged in the R&D, production and sale of cold chain equipment and special containers. |
Energy, chemical, liquid food equipment |
| Short company name |
Stock code | Business revenue in 2019 (RMB100 million) |
Net profit attributable to the parent company in 2019 (RMB100 million) |
Net asset attributable to the parent company as at the end of 2019 (RMB100 million) |
Business overview |
Corresponding business segment of CIMC |
|---|---|---|---|---|---|---|
| Houpu | 300471.SZ | 5.43 | 0.21 | 12.23 | The company is principally engaged in the manufacturing of high-end equipment with clean energy and consultancy, design and construction of corresponding energy projects, including but not limited to the R&D, production and integration of complete equipment for CNG/LNG gas stations for vehicles, natural gas supply equipment for vessels, systems and their core components. |
Energy, chemical, liquid food equipment |
Note: Listed companies with the stock code marked with “ST” (special treatment) and “*ST” (delisting risk warning) are not considered in selecting comparable companies. The above companies are firstly classified based on the business segments of CIMC and listed in the order of revenue in 2019 in the same category. Financial data are converted into RMB and the sources of data are Bloomberg and Wind database.
(II) Selection of valuation indicators
For the industry where CIMC operates, valuation indicators generally include price-earnings ratio (P/E), price-to-book ratio (P/B) and enterprise value ratio (EV/EBITDA). Among the above indicators, EV/EBITDA focuses on the judgment on the overall enterprise value while P/E and P/B focus on the judgment on the value of shareholders’ equity. For the purpose of analysing the equity value of CIMC, it is appropriate to select the price-earnings ratio (P/E) and the price-tobook ratio (P/B) as valuation indicators of comparable companies.
(III) Analysis on valuation of comparable companies
Based on the above standards, the comparable listed companies selected and relevant valuation indicators are set out in the table below:
| Short company name | Stock code | Listing place | P/E-LYR (time) |
P/B-LYR (time) |
|---|---|---|---|---|
| A-share comparable companies | ||||
| Sinotruk | 000951.SZ | Shenzhen Stock Exchange |
20.39 | 3.56 |
| FAW Jiefang | 000800.SZ | Shenzhen Stock Exchange |
425.93 | 0.79 |
| Hualing Xingma | 600375.SH | Shanghai Stock Exchange |
89.25 | 1.39 |
| COSCO SHIPPING Development |
601866.SH | Shanghai Stock Exchange |
16.68 | 1.43 |
| Furui Special Equipment | 300228.SZ | Shenzhen Stock Exchange |
Negative | 1.80 |
| Square Technology | 603339.SH | Shanghai Stock Exchange |
24.78 | 1.83 |
| Houpu | 300471.SZ | Shenzhen Stock Exchange |
167.89 | 2.85 |
| Average | 37.77 | 1.95 | ||
| Median | 22.58 | 1.80 | ||
| Comparable companies in H-share and other | overseas markets | |||
| Sinotruk (Hong Kong) | 3808.HK | Hong Kong Stock Exchange |
16.79 | 2.16 |
| Wabash National | WNC.N | New York Stock Exchange |
7.82 | 1.32 |
| COSCO SHIPPING Development |
2866.HK | Hong Kong Stock Exchange |
5.57 | 0.49 |
| Short company name | Stock code | Listing place | P/E-LYR (time) |
P/B-LYR (time) |
|---|---|---|---|---|
| Chart Industries | GTLS.O | NASDAQ | 53.81 | 2.15 |
| Trinity Industrial | TRN.N | New York Stock Exchange |
19.06 | 1.23 |
| Average | 20.61 | 1.47 | ||
| Median | 16.79 | 1.32 |
Note: The valuation data in the table above is the closing data on the trading day prior to the benchmark date. The P/E-LYR is the ratio of the total closing market value of comparable companies on the trading day prior to the benchmark date to the net profit attributable to the parent company of comparable companies in the most recent fiscal year. The P/B-LYR is the ratio of the total closing market value of comparable companies on the trading day prior to the benchmark date to the net assets attributable to the parent company of comparable companies at the end of the most recent fiscal year. Negative value and value above 100 are excluded in the calculation of the “average value” and the “median value” of the above valuation indicators. The source of the data is Bloomberg database.
The share transfer price of A shares and H shares of CIMC in the Transaction is RMB9.83 per share and the corresponding P/E-LYR is 26.26 times, which is between the average value and the median value of the P/E-LYR of A-share comparable companies and above the average value and the median value of the P/E-LYR of comparable companies in H share and other overseas markets.
The corresponding P/B-LYR of the share transfer price is 1.00 time, which is below the average value and the median value of the P/B-LYR of A-share comparable companies and within the valuation range of the P/B-LYR of A-share comparable companies. It is below the average value and the median value of the P/B-LYR of comparable companies in H-share and other overseas markets and within the valuation range of the P/B-LYR of comparable companies in H-share and other overseas markets.
III. Comparison with the Historical Transaction Prices
The comparison between the transfer price and the arithmetic average of the daily weighted average price of A shares of CIMC for a period of time before the benchmark date is as follows:
| Period | Arithmetic average of the daily weighted average price for the corresponding period (RMB/ share) |
Transfer price/ Arithmetic average of the daily weighted average price for the corresponding period |
|---|---|---|
| 1 trading day before the benchmark date |
9.08 | 108.28% |
| 5 trading days before the benchmark date |
9.10 | 108.04% |
| 10 trading days before the benchmark date |
8.88 | 110.69% |
| 20 trading days before the benchmark date |
8.58 | 114.55% |
| 30 trading days before the benchmark date |
8.48 | 115.86% |
| 60 trading days before the benchmark date |
7.89 | 124.56% |
Note: In calculating ‘Transfer price/Arithmetic average of the daily weighted average price for the corresponding period, the exact values before rounding of the “Arithmetic average of the daily weighted average price for the corresponding period” were used.
It is noted from the above table that, the transfer price per share of the Transaction is RMB9.83, representing a premium of 8.28%, 8.04%, 10.69%, 14.55%, 15.86% and 24.56% over the arithmetic average of the weighted average transaction price of A shares of CIMC for 1 trading day, 5 trading days, 10 trading days, 20 trading days, 30 trading days and 60 trading days before the benchmark date, respectively. Therefore, in terms of A shares trading, the price of the Transaction is not lower than the average transaction price of the Target Company's A shares in the open market during the historical period, and is reasonable.
The comparison between the transfer price per share of the Transaction and the arithmetic average of the daily weighted average price of H shares of CIMC for a period of time before the benchmark date is as follows:
| benchmark date is as follows: | ||
|---|---|---|
| Period | Arithmetic average of the daily weighted average price for the corresponding period (HK$/ share) |
Transfer price/ Arithmetic average of the daily weighted average price for the corresponding period |
| 1 trading day before the benchmark date |
8.29 | 132.91% |
| 5 trading days before the benchmark date |
8.14 | 135.25% |
| Period | Arithmetic average of the daily weighted average price for the corresponding period (HK$/ share) |
Transfer price/ Arithmetic average of the daily weighted average price for the corresponding period |
|---|---|---|
| 10 trading days before the benchmark date |
7.83 | 140.62% |
| 20 trading days before the benchmark date |
7.71 | 142.90% |
| 30 trading days before the benchmark date |
7.64 | 144.20% |
| 60 trading days before the benchmark date |
7.03 | 156.74% |
Note: In calculating “Transfer price/ Arithmetic average of the daily weighted average price for the corresponding period”, the exact values before rounding of “Arithmetic average of the daily weighted average price for the corresponding period” were used and the transfer price per share of the Transaction is converted into HK$11.01 based on the central parity rate of RMB against HK$ on benchmark date.
It is noted from the above table that, the transfer price per share of A shares and H shares of CIMC in the Transaction is RMB9.83 (or HK$11.01, which is converted based on the central parity rate of RMB against HK$ on benchmark date), representing a premium of 32.91%, 35.25%, 40.62%, 42.90%, 44.20% and 56.74% over the arithmetic average of the weighted average transaction price of H shares of CIMC for 1 trading day, 5 trading days, 10 trading days, 20 trading days, 30 trading days and 60 trading days before the benchmark date, respectively. Therefore, in terms of H shares trading, the transfer price is not lower than the average transaction price of the Target Company's H shares in the open market during the historical period, and is fair and reasonable.
Considering the historical transaction prices of CIMC's A shares and H shares aforesaid, the transfer price is not lower than the average transaction price of the Target Company's A shares and H shares in the open market during the historical period, and is reasonable.
Chapter III Valuation Assumptions
I. General Assumptions
(I) Open market assumption
Open market assumption assumes that both parties of the asset transaction or the proposed assets transaction in the market are in equal position and have opportunities and time to obtain sufficient market information, so as to make rational judgments on the functions, purposes and transaction prices of the assets. The open market assumption is based on the fact that the assets can be traded openly in the market.
(II) Going concern assumption
The going concern assumption was made under the prerequisite of continuing and normal operations of the enterprise, it will continue its operations at the current scale and status, without termination or massive reduction of its business scale in the foreseeable future.
II. Special Assumptions
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This report assumes that the external economic environment remains unchanged, and the country’s current macroeconomic situation does not change significantly on the reporting benchmark date.
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There are no major changes in the social and economic environment in which the enterprise is located, and in the taxes and tax rates implemented.
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The management of relevant companies will perform its duties in the future operating period and continue to maintain the current operation management model for continuous operation.
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No other force majeure or unforeseen factors will have a significant adverse impact on the enterprise.
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This report assumes that the relevant basic information, financial information and public information are true, accurate and complete.
When any of the above conditions changes, the analysis in this report will generally become invalid.
Chapter IV Report Conclusions
I. Report Conclusions
Based on the foregoing analysis, this report mainly uses the comparable company method combined with the historical transaction prices to analyze the reasonableness of the transaction consideration. The transfer price of the Transaction was determined after negotiation of parties under the prerequisite that it does not fall below the higher of “the arithmetic average of the daily weighted average price of the 30 trading days prior to the date of indicative announcement in relation to the Transaction to be published by the Target Company” and “the audited net asset value per share of the Company for the latest financial year”, which is reasonable, and will not prejudice the interests of COSCO SHIPPING Development and its shareholders.
II. Report Use Restrictions
This report can only be used for the purpose and uses stated in this report. In addition, this report demonstrates whether the pricing of the Transaction is reasonable against the purpose stated herein, without consideration given to the impact to the asset price by changes of the country’s macroeconomic policies, natural forces and other force majeure. Upon change of the aforementioned conditions and the assumptions of going concern made by the report, conclusions of this report would generally become invalid. CICC assumes no legal responsibility for the invalidation of the report results due to such changes.
The prerequisite for availability of this report is that this economic action complies with relevant provisions of the national laws and regulations, and has been approved by relevant departments.
Without the consent and review of CICC, all or part of the content of this report shall not be excerpted, quoted or disclosed in public media, unless otherwise stipulated by laws, regulations and relevant parties.
The opinions expressed by CICC in the report are based on the market situation, economic situation, financial position and other information collected as of 25 August 2020. This report does not consider the events and circumstances that occur after the above date. Investors shall pay attention to relevant announcements or events that will be released after the benchmark date. For the purpose of this report, this report does not consider the future trading activities and share price performance of relevant companies.
The validity period of this report is 12 months: from 26 August 2020 to 25 August 2021.
(No text below, it is the signature page for Valuation Report of China International Capital Corporation Limited in Respect of Material Asset Disposal of COSCO SHIPPING Development Co., Ltd.)
| Valuers: | ||
|---|---|---|
| Mo Taiping | XingHongyuan |
China International Capital Corporation Limited
12 October 2020