Fosun's long-term holdings are concentrated in growth companies with future value, aiming to support their achievement of long-term strategic goals and promote their industrial development. This also enables timely balance between value realization and investment withdrawal, creating excess capital returns for the company's shareholders.
With the upward trend of the Hong Kong stock market, Fosun International (00656) has attracted market attention recently.
On May 28th, Fosun International released an announcement declaring its sale of Hauck Aufhäuser Lampe Privatbank AG (HAL), a subsidiary held by Fosun International's own subsidiary, to ABN AMRO Clearing Bank N.V. for a total price of approximately €670.3 million. After the transaction is completed, Fosun International will no longer hold any HAL shares, but Fosun will hold all of HAL's Hauck & Aufhäuser Fund Services S.A. (HAFS) shares, which is HAL's fund service business.
After the announcement, the stock price of Fosun International continued to rise, reflecting its ability to recover value and gaining market affirmation. However, if we take into account the significant profit contribution gained from the sale of HAL, the light asset operation mode of HAFS fund service business, and the market valuation standard reflecting Fosun International's true potential, it is not enough to fully represent the actual strength of the company.
It is worth noting that based on the transaction price of €670.3 million for the acquisition, the project is estimated to achieve a double-digit internal rate of return. Since Fosun International acquired HAL (formerly known as H&A) in 2016, Fosun has provided strong industrial support to HAL by leveraging its deep operational management and assisting HAL to fully leverage its advantages in global strategy resources, accelerating business upgrades and achieving continuous growth in the value of HAL's assets. In fact, achieving such an ROI within the past eight years is rare.
Behind what appears to be simple "decluttering," it should not be underestimated that as an industrial holding group, Fosun has always been able to discover excellent companies in the "value gap," and by providing long-term capital and supporting their outstanding management teams and related resources, they enhance the development of subsidiary companies and enable them to become industry leaders, while also taking advantage of the best opportunities to realize values in an orderly fashion.
In fact, great companies usually have their own unique set of replicable patterns. Through the HAL transaction, the market should understand that Fosun has a standardized, replicable, and sustainable core industry operation capability of "global operation" + "value realization".
In 2016, Fosun International officially acquired H&A (renamed HAL thereafter), which not only marked the successful implementation of Fosun's "China Momentum, Global Resources" philosophy but also laid the foundation for Fosun International's globalization strategy, while also representing an important step for Fosun to deeply penetrate the high-end wealth management market.
Since the acquisition, Fosun has begun to expand the business scale, enhance the coverage of business areas, lay out new technologies and new tracks through investment and acquisition, in order to boost HAL's internal growth momentum. At this stage, Fosun provided continuous industrial support for HAL's ongoing merger and integration through deep operational management, not only in the form of acquisition integration but also in supporting HAL's development in the Chinese market. Utilizing the high-speed growth of the Chinese market to drive global performance, Fosun helped HAL to accelerate its business model's globalization process.
Data shows that when Fosun acquired H&A in 2016, H&A's total assets under management were approximately €43 billion (including €8 billion in AUM (Assets Under Management) and €35 billion in custodied assets (Assets Under Custody)). After the acquisition, Fosun provided strong industrial support and assisted HAL in the areas of business development and globalization. In 2021, Fosun empowered HAL with key mergers and acquisitions, promoting a profound leap in HAL's M&A history. With the acquisition of Bankhaus Lampe KG, a top German private bank, HAL's wealth management business's asset management scale broke through €17 billion. In 2023, HAL's total revenue reached €435 million, with a net profit of €83 million. HAL's total assets under management reached €265.213 billion, making it one of Germany's top ten private banks. Previously, HAL was ranked 20th in the German market.
Overall, after the merger and integration, HAL's revenue scale and market ranking have greatly improved. For private banking, asset management, and custodian business, the higher ranking and larger scale make it easier for the bank as a whole to be admitted to the whitelist of important customers, providing the prerequisites for internal customer acquisition. After the merger and integration, operational projects such as IT, risk control, and compliance can all play a role in achieving economies of scale, reducing HAL's operating costs, optimizing cost-benefit ratios, and improving profitability. In addition, against the backdrop of accelerating the digital transformation of the global financial industry, Fosun assisted HAL in deepening its digital transformation, and HAL's online platform, Zeedin, has won the "Best Robo Advisory" award in Germany for several consecutive years.
The analysis points out that the H&A series of mergers and acquisitions reflects the improvement of Fosun's global financial layout and confirms its globalization and M&A investment and integration capabilities.
In fact, this is not an "exception" within Fosun's industrial operation system. In 2003, Fosun participated in the restructuring of Nanjing Iron & Steel with a cost of RMB 1.65 billion. Through deep industrial operation, Fosun assisted Nanjing Iron & Steel in increasing its revenue from RMB 6.8 billion to RMB 72.5 billion in 2023, and increasing its net income attributable to shareholders from RMB 500 million to RMB 2.13 billion in 2023. The steel output increased from 1.69 million tons to 10,398,700 tons in 2023. During this more than 20-year period, Fosun has been actively promoting the digital transformation of Nanjing Iron & Steel, promoting the development of its smart factories, assisting Nanjing Iron & Steel to focus on the development of special steel with significant market competitive advantages, as well as expanding energy-saving and environmentally friendly businesses, and promoting the transformation and upgrading of Nanjing Iron & Steel's business. During this more than 20-year period, Nanjing Iron & Steel has achieved rapid development, and Fosun has also grown together with Nanjing Iron & Steel, realizing long-term, stable, and considerable excess investment returns in the process of exiting. According to market news, in addition to the transaction price of 13.58 billion yuan for the sale of Nanjing Iron & Steel, if Fosun participated in the restructuring of Nanjing Iron & Steel with a cost of 1.65 billion yuan in 2003, after 20 years, coupled with Nanjing Iron & Steel's annual dividends, Fosun's pre-tax floating profit will exceed 15.2 billion yuan.
It is not hard to see that Fosun's long-term concentration of shares is in growth-oriented companies with future value, in order to support enterprises to achieve long-term strategic goals, form industrial development, and also timely realize the balance between investment and exit values, and create excess capital returns for the company's shareholders.
Returning to the sale of HAL, this transaction is only a part of HAL, and Fosun will continue to hold the HAFS fund service business, which is a light-asset "cash cow" business, which is expected to continue to create tens of millions of euros in annual profits in the future, and retain approximately 200 billion euros in custodial assets. HAFS is one of the top 10 fund service companies in the German-speaking area, and is independent of the Luxembourg market, the center of the European fund industry, where it is ranked in the top three of the fund service business on a permanent basis, with strong market influence and reputation. This business will continue to generate synergies with Fosun's financial businesses such as insurance and asset management in Europe. Fosun will also continue to invest in and pay attention to market opportunities related to this business.
From another perspective, Fosun's exit from non-core businesses with good valuations will help enhance the company's net asset value and also help Fosun achieve more focused and efficient development in the new market environment.
At the same time, after this transaction, the released funds can be redeployed by Fosun to core businesses and other higher-growth opportunities, and the entrance and exit of its assets is consistent with the strategy of focusing on core and high-growth businesses. Therefore, globalization and innovation will become more clear driving forces for the group's future development. This also means that Fosun's focus strategy will be clearer in the future: it will proactively focus on two types of assets, one is the asset that can be the best or second best, and the other is the asset that can maintain stable income, profit, and continuous dividends.
Moreover, streamlining its operations will also help to reduce the discount of the holding company's share price. Taking a leaf from the advanced experience of the life sciences and medical diagnosis fields, the "leader" in the past valuation V-shaped reversal history, Danaher, focused on the biotechnology and life sciences fields, spun off low-growth subsidiaries for separate listings, and kept the high-growth business subsidiaries in consolidation.
In addition, similar to Fosun International, Danaher has an excellent M&A system and mature management and operational structure that increases the transparency of its business, constantly peels off non-core businesses to maintain its growth, and also keeps its revenue in a high-growth trend. Based on HAL and Nanjing Iron & Steel's successful global operations cases, orderly assets entrance and exit, not only have they proven the successful landing and value realization of past strategies and verified Fosun's investment strength and vision, they have also demonstrated Fosun's ability to identify undervalued stocks and realize high performance, possess the core ability to create the number one or number two high-profit enterprise in the world, and various potential leading edge businesses in the geographic and industry reserves are evolving, all worth giving higher expectations to its future growth.
Moreover, the Hong Kong stock market has been exceptionally volatile in recent years. After this round of adjustments, Fosun International's investment value has gradually emerged, mainly manifested in three aspects.
Firstly, the company has the ability of global operation, and its growth space is further increased.
The company has not given up on mid-term timeline investments. In addition to capturing some good liquidity and profitability opportunities in the future, it will focus on investing in upstream and downstream and peripheral business areas around core holdings to enrich and strengthen the core enterprise ecosystem, also to create longer-term investment returns for shareholders.
Based on the successful cases of HAL and Nanjing Iron & Steel's global operations, orderly asset entrance and exit opportunities, not only have they verified the successful landing and value realization of past strategies, but also demonstrated Fosun's investment strength and vision. With its scope and industry reserves, all the potential leading enterprises are evolving.
Secondly, create certainty in uncertainty, bringing steady dividend returns to shareholders.
Since listing, fosun intl has maintained a good and stable dividend tradition. So far, the company has paid dividends 21 times. This year, as expected, cash dividends reached HKD 310 million, and the dividend rate remained stable at 20%. Cash dividends totaling HKD 25.6 billion have been paid out over 17 years since listing.
fosun intl has good profitability, with double-digit growth in revenue and net profit in 2023. The total revenue was RMB 198.2 billion, a year-on-year increase of 8.6%, achieving continuous growth for three years; the net profit attributable to the parent company was RMB 1.38 billion, and the profitability is stabilizing and rebounding, showing outstanding performance among comprehensive listed companies. As fosun's earnings per share and dividends per share steadily increase, the dividend indicators continue to improve, demonstrating good profitability and conveying positive market signals.
Considering the huge challenges that the unstable international situation in the past year or two has brought to investment profitability, the stability of investment returns has become the primary factor affecting market investors. In the context of the era of "asset shortage", targets like fosun intl with a solid fundamental and a willingness to provide stable dividends to investors are undoubtedly more attractive.
Third, the quality of assets and credit has been steadily improving, and value restoration has entered a strong positive cycle.
With the continuous promotion of the core business strategy, fosun accelerated its exit from non-strategic and non-core assets, including Nangang, Jianlong, Pandashipping, ATG, and a series of real estate projects, to achieve a cash inflow of approximately RMB 40 billion at the consolidated financial statement level.
In recent years, faced with complex and changing global economic situations, fosun has taken active measures to continuously optimize fund and asset structures, broaden financing channels, reduce debt levels, and provide solid support for the execution of the core business strategy. On May 30th, Standard & Poor's confirmed fosun intl's "stable" credit rating, fully recognizing its positive activities and achievements over the past two years, and expects its asset and credit quality to remain stable and continue to improve.
From the perspective of valuation, given systemic risks in the Hong Kong stock market, fosun intl's current market capitalization is approximately HKD 36 billion (equivalent to approximately RMB 33.392 billion), and at that time the company held cash of more than RMB 70 billion, exceeding its market capitalization by nearly two times. The price-to-book ratio is also at a low level of 0.26 times, which is very attractive. For investors, choosing leading companies with high market attention and considering buying during historically low PB ranges also follows the principle of "Buying high-quality companies at reasonable prices".
Against the background of uncertainty in the global consumer market, based on fosun's accumulated industrial operation capabilities over the years, the company actively seeks high-quality partners and projects for cooperation in the market. The market remains optimistic about its prospects, and in the future, the company will provide strong support for its valuation restoration and revaluation based on its attributes of light asset transformation, stable cash flow, and high growth in performance.