The current situation of the company

Chengfang Huida, a nominal company of China Cinda, has signed a fixed increase agreement of Jinzhou Bank (0416.hk) to subscribe for 5.27 billion shares at a price of Rmb1.95 per share, which is still subject to regulatory approval.

Comment

China Cinda name Sun Co., Ltd. Cheng Fang Huida participated in the fixed increase plan of Jinzhou Bank. Jinzhou Bank announced on the evening of March 10 that on January 23, 2020, the board of directors signed a directional additional subscription agreement with Chengfang Huida and Liaoning Financial Holdings to subscribe for 5.27 billion and 930 million domestic shares at a price of 1.95 yuan per share, accounting for 37.69% and 6.65% of the total share capital after the issue, and the additional funds were used to supplement core first-tier capital. Among them, Chengfang Huida is Sun Company of China Cinda, which is 90% owned by China Cinda after penetration, but according to the announcement, the equity is only nominally owned by China Cinda, and the actual economic interests and voting rights are held and controlled by the central bank. In addition, the restructuring plan still under negotiation includes the sale of claims with a book value of 150 billion yuan by Jinzhou Bank to Fang Huida.

We believe that the incident is a signal that non-performing asset management companies will actively participate in the restructuring of financial institutions. Although Chengfang Huida is only the nominal grandson of China Cinda, and the actual control is the central bank, we still believe that the incident indicates that non-performing asset management companies may actively participate in equity projects such as the restructuring of financial institutions. On January 3, 2020, the Bancassurance Regulatory Commission issued guidelines on promoting the high-quality development of the banking and insurance industries, which mentioned the need to actively and steadily promote the disposal of problematic financial institutions and risk resolution, and encourage financial asset management companies to strengthen the main business of non-performing assets disposal and participate in it.

The fixed price increase is 0.33x 1H19 pram B, which we think is in line with expectations. The fixed increase price of 1.95 yuan per share is 3.3% off the book value of equity, which is close to the average purchase discount of non-performing assets in the market, and 10.91% off the closing price of Jinzhou Bank on the last day before the suspension. It takes into account the recent fluctuations in the H-share market due to uncertainty in China and the global economy. Therefore, we think the price is fair and in line with expectations.

Valuation proposal

Taking into account the current macroeconomic uncertainty, regulatory guidance risk resolution background, China Cinda as one of the four major AMC, a wide range of business space, we maintain the profit forecast, target price and outperform industry rating unchanged, the current stock price corresponds to 0.42x 2020e Pamp B, the current target price corresponds to 0.50x 2020e Pmax B and 37% rising space. Assuming that the dividend rate remains unchanged at 30%, the 2020e dividend yield is 8.0%.

Risk.

Asset quality and investment asset price performance were lower than expected, provision and fair value fluctuations dragged down performance, and dividend rate was reduced.