The Zhitong Finance App learned that CICC released a research report stating that the 24/25 EPS forecast for Mingchuang Premium (09896) remained unchanged at 2.16/2.62 yuan, and introduced the 26-year EPS forecast of 3.16 yuan. The valuation was switched to 2025, and the target price of Hong Kong stocks was raised by 19% to HK$56.87, maintaining the “outperforming industry” rating. The company announced the issuance of equity-linked securities with a total principal amount of 0.55 billion US dollars and due in 2032; at the same time, a subscription agreement and call option spread were concluded for the equity-linked securities to raise capital.

CICC's main views are as follows:

The transaction framework enabled the company to raise capital in the form of convertible bonds, while delaying potential dilution to a higher actual exercise price of HK$102.1, a 100% premium over the closing price on January 6.

The total amount of equity-linked securities issued this time is $0.55 billion, maturing in 2032, and the coupon interest is 0.5%. Holders of the securities can convert the securities into cash within 6 years or after the delivery date to 10 scheduled trading days before the expiration date. The initial exercise price is HK$64.395. At the same time, the company establishes price spreads for call options, including lower limit call options (with cash delivery, exercise price equal to the conversion price of equity-linked securities) and upper limit subscription warrants (with physical delivery, exercise price of HK$102.1). Under this transaction framework, the company will only issue shares when the maturing share price is above HK$102.1 (a total of about 66.41 million shares, accounting for about 5.31% of the company's total issued and tradable shares). In other cases, the company only obtains debt financing at low interest rates. The bank believes that while helping the company obtain financing, it also delays potential dilution to a higher actual exercise price. Considering that the conversion price of HK$102.1 is 100% premium over the closing price of Hong Kong stocks of HK$51.05 on January 6, the bank believes that this move reflects the company's confidence in long-term development.

The company plans to use the net capital raised from this transaction for overseas business development and share repurchases.

The company expects to raise a net amount of $0.457 billion (approximately HK$3.55 billion) from this transaction, of which 50% will be used for overseas store network expansion, supply chain optimization and development, brand building and promotion, additional overseas working capital and other general corporate purposes, and 50% for repurchasing common shares or American depositary shares. The compound revenue growth rate of Mingchuang Premium's overseas business reached 43% in 2021-2023, with 449 net overseas stores opening in 1-3Q24, including 302 net stores in the direct market. The bank believes that this financing will help the overseas business maintain rapid development. In terms of shareholder returns, the company promised an annual dividend ratio of not less than 50%, and announced a HK$2 billion share repurchase plan in August '24. The bank believes that the funds raised will also further increase shareholder returns.

Harry Potter sales during the peak season overseas are expected to help achieve rapid growth in 4Q24.

Every year, the fourth quarter is the peak season for the company's overseas business. For the first time, 4Q24's Harry Potter IP products are being updated simultaneously around the world, and related products are popular in many parts of the world. The bank is optimistic about the company's 4Q24 revenue growth and profitability.