Xinhua News, Beijing, August 15 (Liu Xuyao) On the morning of August 15, Wanda Commercial held an extraordinary shareholders’ meeting at the Sofitel Hotel in Beijing to consider a special resolution to withdraw the H-share listing from the Hong Kong Stock Exchange. After the meeting, a small shareholder told reporters that the motion had been approved by the shareholders’ meeting. So far, Wanda Commercial’s privatization transaction has taken the most crucial step.
After less than two years of listing in Hong Kong, he chose to delist because the market did not reflect the true value of Wanda Commercial. Wang Jianlin’s decisive proposal for a privatization plan that was both popular with shareholders and beneficial to his own future transformation and development can be called a classic case of capital markets.
This is also the largest privatization case in the global capital markets this year. According to Wanda Commercial’s previous announcement, after the privatization of H shares is completed, Wanda Commercial has applied to the China Securities Supervision Commission for the possible issuance of class A shares, and will continue to consider the opportunity of listing in class A shares after the delisting of H shares.
Large and small shareholders benefit unanimously, flash delisting
Wang Jianlin, chairperson of Wanda Group, once explained that the core reason for the privatization of Wanda Commercial’s H shares was that the company’s value was seriously undervalued. Wanda Commercial’s 2015 annual report showed that its earnings per share were 6.6 yuan, and its net assets per share were 39.8 yuan. However, its share price has been hovering around net assets for a long time. This low valuation makes Wang Jianlin "unbearable".
Wanda Group, the offeror in the largest privatisation of Hong Kong stocks to date, offered a more reasonable price in the deal plan. The price of 52.8 Hong Kong dollars is 10% higher than the company’s IPO price of 48 Hong Kong dollars in 2004, and a 44.5% premium to the closing price before the first privatization announcement on March 29.
Finally, in the special resolution vote on August 15, H-share shareholders voted in favor, reflecting the tacit understanding of the interests of the two parties in the privatization transaction.
In fact, before this vote, the privatization transaction has been approved by some important shareholders, according to Wanda Commercial’s announcement on July 25, China Life has issued a letter of intent to the joint offeror for its intention to support delisting, data show that China Life holds Wanda Commercial 48.445 million H shares, accounting for 7.42% of all H shares issued; the same day, the Kuwait Investment Authority also issued a similar letter of intent, which also holds 7.42% of Wanda Commercial’s H shares.
From the perspective of market transactions, a few trading days before the vote, Wanda Commercial’s H share price rebounded rapidly to around HK $51 per share, indicating that many small and medium investors in H shares also have confidence in the privatization transaction plan.
Wanda Commercial’s delisting in Hong Kong this time has created a miracle of the delisting process of Hong Kong-listed companies. It took only six months from the issuance of the delisting offer to the final successful delisting. Behind the miracle, Wanda’s strong execution of "living up to its word" can also be seen. According to Wanda Commercial’s plan, the final date of H-share trading is expected to be September 13, and it is expected to withdraw the listing status of H-shares from the Hong Kong Stock Exchange at 4:00 pm on September 20.
Wanda will become a class A share of the scarcest resources
In the market, Wanda Commercial’s shift from H shares to class A shares is more conducive to obtaining a reasonable valuation. On the one hand, the class A share market has a high degree of attention to large-scale high-quality blue-chip stocks. On the other hand, the main consumer customer groups of Wanda Commercial are concentrated in the mainland, and the mainland market has a higher degree of recognition of Wanda Commercial’s strategic structure and competitive advantages.
Wanda Commercial’s core product "Wanda Plaza" also has unique core competitiveness. Thanks to the core competitive advantages Wanda has formed in the market over the years: a complete industrial chain, a unique "order real estate" model, and efficient control and execution capabilities, Wanda Plaza has successfully achieved rapid replication across the country. It is the only urban complex investment and operation enterprise in China that has achieved a national layout.
If Wanda Commercial lands on class A share, its modern service industry positioning will be the "alternative" among the current class A share real estate listed companies, which is expected to have a certain impact on the valuation of some real estate companies that are entirely engaged in property sales.
In addition, for the class A share capital markets that have been reborn from chaos, it seems commonplace to hype high-tech concepts, stale market value management, foolish restructuring, and ignore the interests of small and medium investors.
Once Wanda Commercial successfully enters the class A share market, as a large company that conforms to the industrial orientation, creates a large number of jobs, and has investment value, it is like a clear stream, which can wash away the pollution and lead the capital markets to establish a responsible and responsible blue chip image.
Class A share market veteran also pointed out that in the current central government vigorously promote the supply side reform background, class A share capital markets are also tilted towards the real economy, as a new annual increase of more than 100,000 employment of industrial companies, Wanda commercial engaged in the modern service industry is the government to encourage the support of key industries, but also the future economic growth point, class A share should welcome Wanda commercial such excellent entity companies to join.
500 billion Big Blue Chip
According to the class A share new share issuance plan previously disclosed by Wanda Commercial, the total number of new shares issued does not exceed 250 million, and the proceeds raised 12 billion yuan, which translates to an average issue price of 48 yuan per share. This pricing corresponds to Wanda Commercial’s net assets of 39.85 yuan per share at the end of 2015, with a price-to-book ratio of only 1.2 times; while in the same period, the price-to-book ratios of Vanke A (000002.SZ), Poly Real Estate (600048.SH) and Greenland Holdings (600606.SH), which are equivalent in the class A share market, are 2.6 times, 1.4 times and 2.1 times respectively, which are significantly undervalued.
What’s more, the nature of Wanda Commercial is not as simple as real estate stocks. In its performance composition, the proportion of property sales continues to decline, and rental income increases rapidly.
From the recently announced Wanda commercial semi-annual report, Wanda commercial first half of the overall contract income of 64.36 billion yuan, 106.6% of the first half of the plan. Rental income 8.48 billion yuan, rent collection rate of 100%; 101.2% of the first half of the plan, an increase of 27%; Wanda Plaza in the first half of the total traffic counting 1.108 billion, an increase of 18.5%.
As the world’s largest commercial real estate operator, behind the Wanda Group in culture, tourism, finance, electricity supplier and other major plate business synergy effect, the market is expected to Wanda commercial future valuation in class A shares will far exceed these residential real estate developers, its share price will be high to more than 100 yuan.
With Wanda Commercial’s net assets exceeding 180 billion yuan by the end of 2015, the market expects that the market value of Wanda Commercial in Class A share will reach 500 billion yuan to 600 billion yuan in the future, which will become a rare big blue chip stock.
Bring your own hotspot, no need to worry about blood draws
For large blue chips with excellent performance and large volume, the market has been worried that their IPO will trigger a blood draw effect. In fact, there is no need to worry about this.
Because there are too many class A shares IPO queues, coupled with uncertain policies, there is no clear timetable for Wanda commercial landing class A shares. During this period, it is not ruled out that the registration system will be implemented.
Therefore, market analysis believes that instead of worrying that Wanda Commercial will form a blood draw effect on the stock market, it is better to consider the demand for high-quality enterprises under the registration system. What’s more, as long as the quality of listed companies is good and can truly attract the majority of investors, the securities market will not be short of money, and the blood draw effect will become an unfounded worry. What can be verified is that when Evergrande recently rushed to raise Vanke, it not only did not drag down the market, but activated market sentiment, and Vanke, "Evergrande concept stocks" and the entire class A share became beneficiaries.
When these well-known high-quality enterprises break through the fence of class A share and attract the post-80s and the youngest post-90s who have gradually become the pillars of society, the stock market can really come alive. The return of a large-scale blue chip with high growth potential like Wanda, which is rare in class A share, will create new investment hotspots for it, and may even lead the market out of the bottom.