Fosun International Limited (HKEX stock code: 00656, “Fosun International”) said a major international investment bank Morgan Stanley has reiterated its “Overweight” rating on Fosun International with a target price of HK$11.4.
In the first half of 2022, Fosun achieved sustainable growth in its revenue, with a total revenue of RMB82.89 billion, representing an increase of 17.7% over the same period in 2021. The company pointed out that after entering the second half of the year, thanks to the Group’s long-term adherence to profound industry operations, the financial and operational indicators of companies in multiple segments have rapidly shown signs of a steady recovery.
Fosun’s Actual Debt is Only RMB100 Billion, Corresponding to Total Assets of RMB270 billion
The market is concern about Fosun International’s debt situation and believes that Fosun is under the pressure of RMB650 billion debt. According to Fosun International’s 2022 interim results, its total assets amounted to RMB849.7 billion and total liabilities amounted to RMB651.3 billion as of 30 June 2022. However, the market’s perception of RMB650 billion debt is in fact a confusing statement.
This RMB650 billion figure is the consolidated total liabilities of Fosun International and its subsidiaries, including the liabilities of its financial institutions such as insurance companies, banks, etc. However, the liabilities of financial institutions and the commonly referred interest bearing corporate debt are two different concepts. In fact, the consolidated interest bearing debt of Fosun International stands at approximately RMB260 billion only, which also consists of debts of its consolidated listed subsidiaries such as Yuyuan and Fosun Pharma, etc. The repayment obligations of these debts are independently borne by the corresponding listed companies. In other words, the actual debt that is borne by Fosun International is only approximately RMB100 billion, corresponding to total assets of RMB270 billion and net asset value (NAV) of around RMB20 per share. From this perspective, Fosun is not under significant debt repayment pressure.
Morgan Stanley Reiterated its “Overweight” Rating on Fosun International with a Target Price of HK$11.4 for the Third Time
Morgan Stanley issued a research report on 16 September, the report said that most of Fosun’s debt at the consolidated level reported in its recent interim results announcement consists of lending by Fosun’s operating subsidiaries. The firm estimated that the debt at the holding company, including onshore debt, offshore debt and bank loans, is much lower. In terms of cash, with a tightening credit market, it is understandable that the company needs to take quick action to convert liquid assets into cash. It is estimated that the cash generated from its recent asset sales, together with its cash on hand is getting closer to being able to repay its near-term debt obligations. Morgan Stanley has therefore reiterated its “Overweight” rating on Fosun International with a target price of HK$11.4.